Question

While Steve is cleaning out his garage, he finds an old surfboard that he no longer needs. As he walks to the dumpster to throw it out, his neighbor John asks if he could have it. John offers Steve a 6-pack of beer (worth $10) in exchange, which Steve happily accepts. Steve has achieved a producer surplus of:_______
a) $50, because that's what the surfboard was likely worth.
b) $o, since he was just going to throw out the board
c) $5, because Steve and John benefited equally from the $10 transaction.
d) $10, the value of the beer he received

Answer 1

Answer:

b) $0, since he was just going to throw out the board  

Explanation:

Producer surplus would have applied if the old surfboard that he no longer needs was produced by him.

Producer surplus measures the benefit to sellers of participating in a market. It is measured as the amount a seller is paid minus the cost of production. For an individual sale, producer surplus is measured as the difference between the market price and the cost of production, as shown on the supply curve.

There is a difference between profit and Producer Surplus which is the fixed cost of production.

In conclusion Steve benefited $10 but that cannot be called a producer surplus.