The amount of producer surplus generated in each of the following situations . a). Gordon lists his old Lionel electric trains on eBay. He sets a minimum acceptable price , known as his reserve price, of $75. After five days of building, the final high bid is exactly $75. He accepts the bid. b). So-Hee advertises her car for sale in the used-car section of the student newspaper for $2000 but she is willing to sell the car for any price higher than $1500. The best offers she gets is $1200, which she declines. c). Sanjay likes his job so much that he would be willing to do it for free. However, his annual salary is $80,000. Concept Introduction: Consumer Surplus : It is defined as the difference between consumer’s willingness to pay and how much does a consumer pay for the goods and services. It is the area above the price level and below the demand curve. Producer Surplus: It is defined as the difference between the amount a producer of a good receives and the minimum amount the producer is willing to accept for the good. It is the area below the price level and above the supply curve.

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Chapter 4, Problem 2P

To determine

The amount of producer surplus generated in each of the following situations.

a). Gordon lists his old Lionel electric trains on eBay. He sets a minimum acceptable price, known as his reserve price, of $75. After five days of building, the final high bid is exactly $75. He accepts the bid.

b). So-Hee advertises her car for sale in the used-car section of the student newspaper for $2000 but she is willing to sell the car for any price higher than $1500. The best offers she gets is $1200, which she declines.

c). Sanjay likes his job so much that he would be willing to do it for free. However, his annual salary is $80,000.

Concept Introduction:

Consumer Surplus:

It is defined as the difference between consumer’s willingness to pay and how much does a consumer pay for the goods and services. It is the area above the price level and below the demand curve.

Producer Surplus:

It is defined as the difference between the amount a producer of a good receives and the minimum amount the producer is willing to accept for the good. It is the area below the price level and above the supply curve.

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