Question

At nick's bakery, the cost to make homemade chocolate cake is $4 per cake. as a result of selling five cakes, nick experiences a producer surplus in the amount of $17.50. nick must be selling his cakes for

Answer 1

The definition of producer surplus is the difference between what the producer receives and what would be the minimum willingness to accept for the item.

Minimum Willingness to Accept: $4 Per cake X 5 Cakes= $20
Producer Surplus= $17.50
$20+$17.50= $37.50 Price 5 chocolate cakes are sold for

$37.50/5= $7.50 per chocolate cake.