Question

Miranda and Jason are in the tutoring business. Miranda is willing to tutor as long as she gets $20, while Jason will not tutor unless he gets $35. If the most that someone would pay for tutoring is $30, how much producer surplus is earned?Miranda = $10; Jason = -$5Miranda = $10; Jason = $0Miranda = $20; Jason = -$5Miranda = $20; Jason = $0

Answer 1

Answer:

Miranda = $10; Jason = $0

Explanation:

Producer surplus is the difference between the price of a good or service and the least amount a producer is willing to accept for his product.

In this question, the price of tutoring is $30.

The least amount Miranda is willing to accept is $20. Her producer surplus is $30 - $20 = $10

For Jason, the least amount he is willing to accept is $35 which is higher than the price. Therefore, Jason would not accept to teach. As a result, his producer surplus would be zero.

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