Question

If Von’s company can produce hang gliders for $10,000 but Valeria is willing to pay $15,000 and finds the model she wants and pays $15,000 for it from his company. Von’s company has

a consumer surplus of $5,000.

a social surplus of $15,000.

a producer surplus of $5,000.

Answer 1

Bob's company is producing hand gliders for $10,000. However, Valeria is willing to pay $15,000. This is a case of Von's company has producer surplus of $5000.

Producer Surplus is defined as the maximum amount the producers are willing to sell for any goods and services minus the actual cost of the goods and services.

In this case, the maximum amount Valeria is will to pay for the good is $15,000, but the actual cost of the good is $10,000. So, the producer surplus here would be $5000. Here, the surplus from Von's company has been asked, which will be $5000, which will be the producer's surplus. The producer's surplus is considered from the point of view of the seller. Here, as the surplus from Von's company has been asked, so it will be the producer's surplus of $5000.