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2 June, 07:26

Tom tunes pianos in his spare time for extra income. Buyers of his service are willing to pay $155 per tuning. One particular week, Tom is willing to tune the first piano for $120, the second piano for $125, the third piano for $140, and the fourth piano for $160. Assume Tom is rational in deciding how many pianos to tune. His producer surplus is

a. $95.

b. $80.

c. $75.

d. $60.

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Answers (2)
  1. 2 June, 07:32
    0
    B) $80

    Explanation:

    The price for every piano tuning = $155, and Tom's costs for tuning pianos area as following:

    $120 < $155, producer surplus = $35 $125 < $155, producer surplus = $30 $140 <$155, producer$160> $155, producer surplus = - $5

    Since Tom is rational, he will only tune 3 pianos per week, since the tuning of the fourth piano is more expensive than the price charged.

    Therefore, Tom's total suppliers surplus = $35 + $30 + $15 = $80
  2. 2 June, 07:43
    0
    Answer:B - $80

    Explanation: Producer surplus is the difference btw what a consumer is paying and what a producer is charging.

    From the above questions, Tom tuned the following pianos:

    Buyer willing to pay $155.

    Tom tuned piano 1 for $120, therefore his surplus on piano 1 is $155 - $120 = $35

    Tom tuned piano 2 for $125, therefore his surplus on piano 2 is $155 - $125 = $30

    Tom tuned piano 3 for $140, therefore his surplus on piano 3 is $155 - $140 = $15

    Tom tuned piano 4 for $160, therefore his surplus on piano 4 is $155 - $160 = ($5)

    All together his surplus is $35+$30+$15 = $80
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