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14 October, 20:48

Mountain River Adventures offers white water rafting trips down the Colorado River. It costs the firm $100 for the first raft trip per day, $120 for the second, $140 for the third, and $160 for the fourth. If the market price for a raft trip was $120 but has now increased to $150, the gain in producer surplus is equal to:

(a) 20$,

(b) 70$,

(c) 80$,

(d) 90$

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Answers (1)
  1. 14 October, 21:01
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    The correct answer is option b.

    Explanation:

    Mountain River Adventures offers white water rafting trips down the Colorado River.

    It costs the firm $100 for the first raft trip per day, $120 for the second, $140 for the third, and $160 for the fourth.

    The market price for a raft trip was $120 but has now increased to $150.

    The producer surplus is the difference between the price that a producer is willing to receive and the price he actually gets.

    The increase in producer surplus due to the increase in price will be

    = $150 - $120

    = $70
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