Question

Determine the amount of producer surplus generated in each of the following situations. a. Gordon lists his old Lionel electric trains on eBay. He sets a minimum acceptable price, known as his reserve price, of $75. After five days of bidding, the final high bid is exactly $75. He accepts the bid. $ b. So-Hee advertises her car for sale in the used-car section of the student newspaper for $2,000, but she is willing to sell the car for any price higher than $1,500. The best offer she gets is $1,200, which she declines. $ c. Sanjay likes his job so much that he would be willing to do it for free. However, his annual salary is $80,000.

Answer 1

Answer & Explanation:

Produced surplus is generated when the supplier sales at a higher price that we was willing to accept for the good.

a) zero as the good is sold at the same amount the supplier wanted.

b) zero as the transactions is not performed.

c) 80,000

as the supplier expect to receive zero while is receiving 80,000 for his services.