The Waco Kid\'sMarginal Cost Cowboy Hats 1st hat 2nd hat 3rd hat 4th hat dollars

Question

The Waco Kid'sMarginal Cost Cowboy Hats 1st hat 2nd hat 3rd hat 4th hat dollars $24 30 38 46 The table above lists the marginal cost of cowboy hats by The Waco Kid, a firm that specializes in producing western wear. If the market price of The Waco Kid's cowboy hats is $40 Select one e Waco Kid will produce four hats a. Th b. producer surplus from the first hat is $40. c. producer surplus will equal $28. d. there will be a surplus, as a result, the price will fall to $24. X Your answer is incorrect. The correct answer is: producer surplus will equal $28.

Explanation / Answer

Since the producer surplus is the difference between the supply curve and prices until supply curve is below price.

Since the MC is supply curve of the firm.

Hence producer surplus=(40-24)+(40-30)+(40-38)

=16+10+2

=$28

Since producer surplus is $28.

Hence option c is the correct answer.

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