Ben's cost of making an additional rocking chair is $75.
A) If he sells it for a $100, his producer surplus is $25.
B) His marginal cost is equal to $75.
C) The marginal benefit to the consumer from the chair will be $75.
D) Both answers A and B are correct.
E) Both answers B and C are correct.

Question

Quizplus · Accepted Answer

Producer surplus is the difference between what a producer is willing to accept for a good versus what they actually receive. Since Ben's cost is $75 and he sells the chair for $100, his producer surplus is indeed $25, making statement A correct. Statement B is also correct because the marginal cost, the cost of producing one more unit, is given as $75. Statement C is incorrect because the marginal benefit to the consumer is not necessarily equal to the cost of production; it's determined by how much the consumer values the chair, which could be more or less than $75.

Ben's Cost of Making an Additional Rocking Chair Is $75