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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.
b) no benefit from the sale.
c) some producer surplus from the sale.
d) a loss.
e) None of the above answers is correct.
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.