Question

Allen tutors in his spare time for extra income. Buyers of his service are willing to pay $40 per hour for as many hours Allen is willing to tutor. On a particular day, he is willing to tutor the first hour for $10, the second hour for $18, the third hour for $28, and the fourth hour for $40. Assume Allen is rational in deciding how many hours to tutor. His producer surplus is:________.

A. $40
B. $64
C. $12
D. $56

Answer 1

So His producer surplus is $64

Step-by-step explanation:

Given:

• first hour for $10
• the second hour for $18,
• the third hour for $28
• the fourth hour for $40

As we know that, manufacturers or producer surplus is the difference between the market price and the price that he is willing to teach, so we have:

(40 - 10) + (40 - 18) + (40-28) + (40-40)

<=> 30 + 22 + 12 + 0 = 64

So His producer surplus is $64