Multiple Choice
Producers often work to maximize their ______ and make them as large as possible.
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5. Consumer and Producer Surplus; Price Ceilings and Floors
Producer Surplus and Willingness to Sell
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Join thousands of students who trust us to help them ace their exams!Watch the first videoMultiple Choice
To determine a product's producer surplus, which of the following must be compared?
A
The price received by the seller and the seller's willingness to sell
B
The market price and the consumer's willingness to pay
C
The equilibrium price and the marginal cost
D
The cost of production and the quantity sold
Verified step by step guidance1
Understand the concept of producer surplus: it is the difference between the price a seller actually receives for a product and the minimum price at which they are willing to sell (which is often related to their cost of production).
Identify the price received by the seller, which is typically the market price at which the product is sold.
Determine the seller's willingness to sell, which corresponds to the minimum price that covers their costs or the marginal cost of production.
Compare the market price (price received) to the seller's willingness to sell (minimum acceptable price) to find the producer surplus.
Recognize that producer surplus is not about consumer willingness to pay or just the quantity sold, but specifically about the difference between the actual price received and the seller's minimum acceptable price.
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