Ahmed is willing to mow lawns for $10 each, Boris is willing to mow lawns for $20 each, and Chelsea is willing to mow lawns for $30 each. If the going rate for lawn mowing is $18, what is the total producer surplus received by the three of them?1 point$80-$6$38
Question
Ahmed is willing to mow lawns for 20 each, and Chelsea is willing to mow lawns for 18, what is the total producer surplus received by the three of them?1 point6$38
Solution
Producer surplus is the difference between the price a producer is willing to accept for a good or service and the actual price they receive.
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Ahmed is willing to mow lawns for 18. So, his producer surplus is 10 = $8.
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Boris is willing to mow lawns for 18. Since Boris's minimum acceptable price is higher than the market price, he will not participate in the market, and his producer surplus is $0.
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Chelsea is willing to mow lawns for 18. Like Boris, Chelsea's minimum acceptable price is higher than the market price, so she will not participate in the market, and her producer surplus is also $0.
So, the total producer surplus received by the three of them is 0 + 8.
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