Asked by Carmia Mattox on May 01, 2024
Verified
A perfectly competitive hardware manufacturer has total revenue of $85 million, total variable costs of $45 million, and fixed costs of $10 million. What is the firm's producer surplus?
A) $85 million
B) $70 million
C) $40 million
D) $30 million
Producer Surplus
The gap between the price that sellers are prepared to accept for a product and the real price it sells for in the market.
Total Variable Costs
The total of all costs that vary with the level of production or output.
Fixed Costs
Costs that do not change with the level of output or business activity, such as rent, salaries, or loan payments.
- Examine the association between the minimization of costs, producer surplus, and economic profit.
Verified Answer
MM
Madison McguirtMay 08, 2024
Final Answer :
C
Explanation :
Producer surplus is the difference between total revenue and total variable costs.
Producer surplus = Total Revenue - Total Variable Costs
Producer surplus = $85 million - $45 million
Producer surplus = $40 million
Producer surplus = Total Revenue - Total Variable Costs
Producer surplus = $85 million - $45 million
Producer surplus = $40 million
Learning Objectives
- Examine the association between the minimization of costs, producer surplus, and economic profit.