Kristi and Rebecca sell lemonade on the corner

Economics Dec 23, 2020

Kristi and Rebecca sell lemonade on the corner. It costs them 7 cents to make each cup. On a certain day, they sell 40 cups, and their producer surplus for that day amounts to $15.20. Kristi and Rebecca sold each cup for:

a. 31 cents.

b. 38 cents.

c. 45 cents.

d. 55 cents.

Expert Solution

The answer is c).

Producer surplus is calculated as follows

producer surplus = (price per unit - cost per unit) * number of units
15.20 = (price per unit - 0.07) * 40
0.38 = price per unit - 0.07
price per unit = 0.45

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