Mountain River Adventures offers whitewater rafting trips down the Colorado River.It costs the firm $100 for the first raft trip per day,$120 for the second,$140 for the third,and $160 for the fourth.If the market price for a raft trip is $150,Mountain River Adventures will offer _ trips per day and will have producer surplus equal to _ per day.

A) three;$90
B) three;$10
C) two;$220
D) four;$80

Question

Mountain River Adventures offers whitewater rafting trips down the Colorado River.It costs the firm $100 for the first raft trip per day,$120 for the second,$140 for the third,and $160 for the fourth.If the market price for a raft trip is $150,Mountain River Adventures will offer _____ trips per day and will have producer surplus equal to _____ per day.

A) three;$90
B) three;$10
C) two;$220
D) four;$80

Zybrea Knight · Accepted Answer

Final Answer : A, Explanation :  The firm will offer three trips per day because the cost of the first three trips ($100, $120, $140) is below the market price of $150, making them profitable. The fourth trip costs $160, which is above the market price, making it unprofitable. The producer surplus is the difference between the market price and the cost of production for each trip: ($150 - $100) + ($150 - $120) + ($150 - $140) = $50 + $30 + $10 = $90.

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