Suppose Kenji is the only seller in the market for bottled water and Eric is the only buyer. The following lists show the value Eric places on a bottle of water and the cost Kenji incurs to produce each bottle of water: Eric's Value Value of first bottle: $7 Value of second bottle: $5 Value of third bottle: $3 Value of fourth bottle: $1 Kenji's Costs Cost of first bottle: $1 Cost of second bottle: $3 Cost of third bottle: $5 Cost of fourth bottle: $7 The following table shows their respective supply and demand schedules: Price Quantity Demanded Quantity Supplied $1 or less 4 0 $1 to $3 3 1 $3 to $5 2 2 $5 to $7 1 3 More than $7 0 4 Use Kenji's supply schedule and Eric's demand schedule to find the quantity supplied and quantity demanded at prices of $2, $4, and $6. Enter these values in the following table. Price Quantity Demanded Quantity Supplied 2 4 6 A price of brings supply and demand into equilibrium. At the equilibrium price, consumer surplus is , producer surplus is , and total surplus is . If Kenji produced and Eric consumed one less bottle of water, total surplus would . If instead, Kenji produced and Eric consumed one additional bottle of water, total surplus would .__

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter16: Bargaining

Section: Chapter Questions

Problem 8MC

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Suppose Kenji is the only seller in the market for bottled water and Eric is the only buyer. The following lists show the value Eric places on a bottle of water and the cost Kenji incurs to produce each bottle of water:

	Eric's Value
Value of first bottle:	$7
Value of second bottle:	$5
Value of third bottle:	$3
Value of fourth bottle:	$1

	Kenji's Costs
Cost of first bottle:	$1
Cost of second bottle:	$3
Cost of third bottle:	$5
Cost of fourth bottle:	$7

The following table shows their respective supply and demand schedules:

Price	Quantity Demanded	Quantity Supplied
$1 or less	4	0
$1 to $3	3	1
$3 to $5	2	2
$5 to $7	1	3
More than $7	0	4

Use Kenji's supply schedule and Eric's demand schedule to find the quantity supplied and quantity demanded at prices of $2, $4, and $6. Enter these values in the following table.

Price	Quantity Demanded	Quantity Supplied
2
4
6

A price of ____ brings supply and demand into equilibrium.

At the equilibrium price, consumer surplus is ____, producer surplus is

____, and total surplus is __

If Kenji produced and Eric consumed one less bottle of water, total surplus would .____

If instead, Kenji produced and Eric consumed one additional bottle of water, total surplus would .____

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