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12 July, 13:08

Muddy's bakery and lily's sweet shop both sell cupcakes. the market price of one chocolate cupcake is $2.50. muddy's is willing to sell a cupcake for as little as $1.65; lilly's is willing to sell a cupcake for as little as $1.75. what is the total producer surplus for the two firms

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  1. 12 July, 15:34
    0
    Muddy's bakery producer surplus = ($2.50 - $1.65) = $0.85

    Lily's sweet shop producer surplus = ($2.50 - $1.75) = $0.75

    Total producer surplus of the two firms = ($0.85 - $0.75) = $1.60

    Explanation:

    Producer surplus is the difference between the amounts the producer is willing to sell the goods for and the actual amount he/she receives when the trade is made.
  2. 12 July, 16:40
    0
    The total producer surplus for the two firms is : $1.60

    ($2.50 - $1.65) + ($2.50 - $1.75) = $1.60
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