Peter owns a sawmill and produces timber for construction. He sells the timber for $300 per cubic metre. His production costs are $140 per cubic metre. His producer surplus is:
A) $140 per cubic metre
B) $300 per cubic metre
C) $160 per cubic metre
D) none of the above

Question

Quizplus · Accepted Answer

Producer surplus is the difference between the price at which a good is sold and the cost of producing it. 
In this case, Peter sells the timber for $300 per cubic metre and his production costs are $140 per cubic metre. 
So, his producer surplus is $300 - $140 = $160 per cubic metre. Therefore, the correct answer is C).

Peter Owns a Sawmill and Produces Timber for Construction