Question

The table shows the individual seller costs of selling Krispy Kreme Doughnuts for a fundraiser. Seller's Costs for Krispy Kreme Doughnuts Name Cost Alpha Chi Omega$ 2 Sigma Chi Beta Theta Pi Alpha Kappa Alpha Sigma Mu Omega 10 13 If the price decreases from $11 to $5, producer surplus decreases by, in numerals, $ . Your answer

Could you please show me how to calculate this...

Answer 1

Producer surplus is the difference between the cost to the producer and the price received. If the price decrease from $11 to $5 the producer surplus decreases by $30. When the price was $11 the total producer surplus was the sum of all individual producer surplus. For example, for Alpha Chi Omega the producer surplus is $9 [11-2]. For Sigma Mu Omega it is -$2 [11-13]. The total producer surplus is was $17. When the price is $5 then by calculating producer surplus in a similar way, we get the producer surplus as -$13. So the producer surplus decreases by $30.