Suppose Marco is willing to tutor for $15 an hour. On Tuesday, he will tutor Kelly for 1 hour and Mike for 3 hours. Kelly will pay $30 an hour, but Mike will only pay $20 an hour, since he has a longer tutoring session. How much producer surplus will Marco gain from tutoring both Kelly and Mike?

Total producer surplus = $30

Explanation:

Producer surplus is the difference between the price a seller is willing to sell and the market price or actual price at which the item is bought. The producer surplus is the additional benefit the seller gets from a sale.

Consumer surplus = Market price - Price seller is willing to sell for

Marco is willing to sell at $15 hour

Kelly is willing to pay $30 per hour

Mike is willing to pay $20 per hour

Surplus from Kelly = 30 - 15 = $15

Surplus from Mike = 20 - 15 = $5

Total producer surplus = ($15*1 hour) + ($5 * 3 hours)

Total producer surplus = 15 + 15 = $30