Answer to Question #270801 in Microeconomics for Anna

Question

Using the information below, calculate the student’s economic surplus:

A student is offered a job making copies in the college library. The job is two days a week from 2pm-3pm. The student’s reservation wage is $10 per hour. The head librarian offers the student $80 per week for the job.

 

A. $10 per week

B. $20 per week

C. $60 per week

D. $80 per week

Answer 1

Economic surplus is obtained by subtracting the amount the producer is expected to pay from the amount the consumer is willing to pay. For this case, the students are willing to earn 10 dollars per hour and work for 2 hours per week (2 pm - 3 pm is 1hour multiplied by 2 days is equal to 2 hours ). 2hours multiplied by 10 dollars is 20 followed per week. Then the head of the library offers the student 80 dollars per week. The economic surplus for students is therefore 80 dollars - 20 dollars which is Equal to 60 dollars.

The answer is option C, 60 dollars per week.