Allen tutors in his spare time for extra income. buyers of his service are willing to pay $40 per hour for as many hours allen is willing to tutor. on a particular day, he is willing to tutor the first hour for $10, the second hour for $18, the third hour for $28, and the fourth hour for $40. assume allen is rational in deciding how many hours to tutor. his producer surplus is

Question

Frank Sexton

Business

8 July, 14:53

Allen tutors in his spare time for extra income. buyers of his service are willing to pay $40 per hour for as many hours allen is willing to tutor. on a particular day, he is willing to tutor the first hour for $10, the second hour for $18, the third hour for $28, and the fourth hour for $40. assume allen is rational in deciding how many hours to tutor. his producer surplus is

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Bennett Cox · Answer 1

Producer surplus is the differential amount between the minimum amount they are willing to accept and the actual amount they actually received.

thus,

Producer surplus = the area triangle when prices are graphed with respect to time.

Using the formula for the area of right triangles

Producer surplus = 1/2 (4) (40)

Producer surplus = $80/hr