At Nick's Bakery,the cost to make a cheese danish is $1.50 per danish.As a result of selling ten danishes,Nick experiences a producer surplus in the amount of $20.Nick must be selling his danishes for
A)$2.00 each.
B)$0.50 each.
C)$3.50 each.
D)$5.00 each.

Question

Quizplus · Accepted Answer

Producer surplus is the difference between the amount a producer receives from selling a good and the minimum amount the producer needs to receive to produce the good. In this case, Nick's producer surplus is $20 for 10 danishes, which means he is receiving $2.00 per danish ($20 ÷ 10 = $2.00). Since the cost to make a danish is $1.50, Nick's minimum amount to produce a danish is $1.50. Therefore, Nick must be selling his danishes for at least $2.00 + $1.50 = $3.50 to have a producer surplus of $20 for 10 danishes.

At Nick's Bakery,the Cost to Make a Cheese Danish Is