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July 4, 2015

Homework Help: Econ

Posted by Shawn on Thursday, February 15, 2007 at 12:55am.

At Nick's Bakery, the cost to make his homemade chocolate cake is $3 per cake. He sells three and
receives a total of $21 worth of producer surplus. Nick must be selling his cakes for
a. $2 each.
b. $7 each.
c. $8 each.
d. $10 each.

i can't figure this question out.

Producer surplus is price (P) less the minimum price the producer would be willing to sell ($3). So you know
3*P - $9 = 21. Ergo, P=$10.

Note: this assumes the $3 cost includes the amount Nick pays himself for his labor

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