Question

Tim mows neighborhood lawns for extra money. Suppose that he would be willing to mow one lawn for ​$10​, a second lawn for ​$15​, and a third lawn for ​$21. Also suppose that three neighbors are interested in having their lawns mowed. Mrs. Jones would be willing to pay ​$30 to have her lawn​ mowed, Mr. Wilson would be willing to pay ​$26​, and Ms. Smith would be willing to pay ​$21.
If Tim offers to mow lawns for ​$21 ​each, what will be his producer​ surplus?Considering Mrs.​ Jones, Mr.​ Wilson, and Ms. Smith​ together, what will be their consumer​ surplus?

Answer 1

Answer:

The producer surplus will be $17.

The consumer surplus will be $14.

Explanation:

The producer surplus is the difference between the minimum price a producer is willing to accept and the price he actually gets.

The consumer surplus is the difference between the maximum price a consumer is willing to pay for a product and the price it actually gets.

The price for mowing lawns is $21.

Producer surplus

= ($21 - $10) + ($21 - $15) + ($21 - $21)

= $11 + $6 + $0

= $17

Consumer surplus

= ($30 - $21) + ($26 - $21) + ($21 - $21)

= $9 + $5 + $0

= $14