Question

Andrew paid $30 to buy a potato cannon, a cylinder that shoots potatoes hundreds of feet. He was willing to pay $45. When Andrew’s friend Nick learns that Andrew bought a potato cannon, he asks Andrew if he will sell it for $60, and Andrew agrees, since he would have sold it for $45. Nick is thrilled, since he would have paid Andrew up to $80 for the cannon. Andrew is also delighted. What is Andrew’s producer surplus from the resale?

Answer 1

Answer: $15

Explanation:

Producer surplus represents the producer's profit when selling a product. It's determined by the difference between the actual amount for which the producer sold the item and the amount they were willing to accept.

In this case, Andrew was willing to accept $45 for the potato cannon, but sold it for $60, so

$60 - $45 = $15 , Andrew's producer surplus.