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Homework answers / question archive / If the price is greater than the marginal cost of producing a good, the seller has: a) some negative consumer surplus from the sale

If the price is greater than the marginal cost of producing a good, the seller has: a) some negative consumer surplus from the sale

Economics

If the price is greater than the marginal cost of producing a good, the seller has:

a) some negative consumer surplus from the sale.

b) no benefit from the sale.

c) some producer surplus from the sale.

d) a loss.

e) None of the above answers is correct.

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The correct answer is: c) some producer surplus from the sale.

The difference between the price earned by a firm and the minimum price that the producer is willing to accept is known as the producer surplus.

The marginal cost represents the supply function for a firm. Therefore, the minimum price that a firm will be willing to accept is a price equal to its marginal cost. A producer will not sell its products if it cannot get a price at least equal to its marginal cost. Thus, for a price above the marginal cost, a firm sells a positive output and earns some producer surplus. For a price lower than the marginal cost, a firm will sell no output and will therefore gain zero producer surplus.