5. Is a company’s producer surplus the same as its profit? (Hint: A company’s total cost is equalto the sum of all marginal costs incurred in producing its output, plus any fixed costs.)Answer: No, they differ by fixed costs. Profit is the difference between the company’s totalrevenue and its total cost. Producer surplus is the difference between total revenue and the firm’sreservation price for the quantity it sells. Its reservation price is the marginal costs of producingeach unit. So producer surplus is the difference between total revenue and the sum of allmarginal costs incurred. That is not the same as profit, which is total revenue minus the sum ofnot only all marginal costs incurred, but also fixed costs.6. In Charlotte, North Carolina, citizens can get their electric power from twosources: ahydroelectric generatorand a coal-fired steam generator. The hydroelectric generator can supplyup to 100 units of power per day at a constant marginal cost of one cent per unit. The steamgenerator can supply any additional power that is needed at
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