Question

David tunes pianos in his spare time for extra income. Buyers of his service are willing to pay $135 per tuning. One particular week, David is willing to tune the first piano for $115, the second piano for $125, the third piano for $140, and the fourth piano for $175. Assume David is rational in deciding how many pianos to tune. His producer surplus is a. $-15. b. $20. c. $30. d. $75.

Answer 1

Answer:

$30

Explanation:

Producer surplus is the difference between the willingness to pay of consumers and the amount a seller is willing to sell his product.

For the first piano, producer surplus = $135 - $115 = $20

For the second piano, producer surplus = $135 - $125 = $10

For the third and fourth piano, the amount David is willing to collect exceeds the willingness to pay of customers, hence no transaction would take place.

Total producer surplus = $20 + $10 = $30

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