Question

Sally sharpens lawn equipment blades in her spare time for extra income. buyers of her service are willing to pay $2.50 per blade for as many blades as sally is willing to sharpen. on a particular day, she is willing to sharpen the first blade for $1.75, the second blade for $2.25, the third blade for $2.75, and the fourth blade for $3.25. assume sally is rational in deciding how many blades to sharpen. her producer surplus is

Answer 1

Producer surplus is the difference between the price received by the seller and his marginal willingness to sell or Marginal cost.

Sp, Sally will keep on sharpening till the willingness to sell is less than or equal to the price received.

This means that sally will sharpen till the Second Blade, earning her a surplus of,

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Therefore, Sally gets a producer surplus of $1.