Tim mows neighborhood lawns for extra money. Suppose that he would be willing to mow one lawn for $12, a second lawn for $17, and a third lawn for $20. Also suppose that three neighbors are interested in having their lawns mowed. Mrs. Jones would be willing to pay $30 to have her lawn mowed, Mr. Wilson would be willing to pay $28, and Ms. Smith would be willing to pay $20.

A) If Tim offers to mow lawns for $23 each. what will be his producer surplus?

B) Considering Mrs. Jones. Mr. Wilson, and Ms. Smith together, what will be their consumer surplus?

Question

Business

Ryleigh Woodward

5 April, 21:30

Tim mows neighborhood lawns for extra money. Suppose that he would be willing to mow one lawn for $12, a second lawn for $17, and a third lawn for $20. Also suppose that three neighbors are interested in having their lawns mowed. Mrs. Jones would be willing to pay $30 to have her lawn mowed, Mr. Wilson would be willing to pay $28, and Ms. Smith would be willing to pay $20.

A) If Tim offers to mow lawns for $23 each. what will be his producer surplus?

B) Considering Mrs. Jones. Mr. Wilson, and Ms. Smith together, what will be their consumer surplus?

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Answers (1)

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Schroeder · Answer 1

Producer surplus USD 20.

Consumer surplus USD 9.

Explanation:

Producer surplus is:

Revenue - Total willingness to sell

The producer surplus would be = $ (23 - 12) + (23 - 17) + (23 - 20) = USD 20

Consumer surplus is:

Total willingness to pay-revenue

The consumer surplus is $ (30 - 23) + (28 - 23) + (20 - 23) = USD 9