Question

Table 7-14 Seller Cost LeBron $700 Kobe $600 Kevin $450 Steve $400 Refer to Table 7-14. You and your best friend want to hire a professional photographer to take pictures of your two families. The table shows the costs of the four potential sellers in the local photography market. You and your friend agree to offer $500 for each session. Who accepts the offer, and what is the total producer surplus in the market? a. LeBron and Kobe; $500 b. Kevin and Steve; $500 c. LeBron and Kobe; $300 d. Kevin and Steve; $150

Answer 1

Producer surplus is the difference between the amount a producer of a good receives and the minimum amount the producer is willing to accept for the good. The difference, or surplus amount, is the benefit the producer receives for selling the good in the market.

We are offering a maximum of 500$.Only Kevin and Steve have price below this.So,only they will accept the offer.

Producer surplus for Kevin= the amount a producer of a good receives - the minimum amount the producer is willing to accept for the good=500-450=50$

Producer surplus for Steve= the amount a producer of a good receives - the minimum amount the producer is willing to accept for the good=500-400=100$

Total producer surplus in market=Sum of Producer surplus for Kevin and steve=100+50=150$

Therefore,Option D is correct