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$

Question

Business

Skyler Singh

23 November, 18:12

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)

Know the Answer?

Miguel Rhodes · Answer 1

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