Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
$2
B
$4
C
$6
D
$0
Understanding the Answer
Let's break down why this is correct
Answer
The farmer’s reservation price, or the lowest price he is willing to accept, is $2 per apple. Because the apples actually sell for $4 each, the farmer receives $2 more than the minimum he would accept. That extra $2 is the producer surplus for each apple sold. So the producer surplus per apple is $4 – $2 = $2. In short, the farmer earns a $2 surplus on every apple he sells.
Detailed Explanation
Producer surplus is the extra amount a producer gets above the lowest price he is willing to accept. Other options are incorrect because Some think the surplus equals the market price, ignoring the farmer’s willingness to sell; Others mistakenly add the farmer’s willingness to the market price.
Key Concepts
Producer Surplus
Topic
Marginal Analysis
Difficulty
easy level question
Cognitive Level
understand
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