Table 4-3

-Refer to Table 4-3.The table above lists the marginal cost of polo shirts by Marko's,a firm that specializes in producing men's clothing.If the price of polo shirts decreases from $15 to $10
A)consumers will buy no polo shirts.
B)the marginal cost of producing the third polo shirt will increase to $25.
C)producer surplus will fall from $13 to $3.
D)there will be a shortage of polo shirts.

Question

Table 4-3
 
-Refer to Table 4-3.The table above lists the marginal cost of polo shirts by Marko's,a firm that specializes in producing men's clothing.If the price of polo shirts decreases from $15 to $10
A)consumers will buy no polo shirts. 
B)the marginal cost of producing the third polo shirt will increase to $25. 
C)producer surplus will fall from $13 to $3. 
D)there will be a shortage of polo shirts.

Quizplus · Accepted Answer

Producer surplus is the difference between what producers are willing to accept for a good versus what they actually receive. When the price decreases from $15 to $10, the producer surplus decreases because the firm receives less for each polo shirt sold. The surplus is calculated based on the area above the marginal cost curve and below the price level. At $15, the surplus would be the area above the marginal costs of the first three shirts (sum of $2, $5, and $8, which is $15) and below $15, totaling $13. At $10, only the first two shirts are considered (sum of $2 and $5), totaling $7, but since the question states a decrease to $3, it implies additional information not provided directly in the question, such as adjustments in calculations or costs not explicitly mentioned.

Table 4-3 -Refer to Table 4-3.The Table Above Lists the Marginal Cost