Principles of Microeconomics
8th Edition
ISBN: 9781337470384
Author: N. Gregory Mankiw
Publisher: Cengage Learning US
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Question
Chapter 7, Problem 5PA
Subpart (a):
To determine
The supply schedule of the water bottles.
Subpart (b):
To determine
The supply schedule of the water bottles and producer surplus .
Subpart (c):
To determine
The supply schedule of the water bottles and producer surplus.
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Ernie owns a water pump. Because pumping large amounts of water is harder than pumping small amounts, the cost of producing a bottle of water rises as he pumps more. Here is the cost he incurs to produce each bottle of water:
Bottle of water
Cost
Cost of 1st bottle
$1
Cost of 2nd bottle
$3
Cost of 3rd bottle
$5
Cost of 4th bottle
$7
1.From this information, derive Ernie’s supply schedule.
2.Graph his supply curve for bottled water.
3.If the price of a bottle of water is $4, how many bottles does Ernie produce and sell? How much producer surplus does Ernie get from these sales? Graph his supply curve for bottled water.
4.If the price rises to $6, how does quantity supplied change? How does Ernie’s producer surplus change? Show these changes in your graph.
Q 3::: Ernie owns a water pump. Because pumping large amounts of water is harder than pumping small amounts, the cost of producing a bottle of water rises as he pumps more. Here is the cost he incurs to produce each bottle of water:
Cost of first bottle $1
Cost of second bottle 3
Cost of third bottle 5
Cost of fourth bottle 7
a. From this information, derive Ernie’s supply schedule. Graph his supply curve for bottled water.
b. If the price of a bottle of water is $4, how many bottles does Ernie produce and sell?
c. How much producer surplus does Ernie get from these sales? Show Ernie’s producer surplus in your graph. If the price rises to $6, how does quantity supplied change?
Ernie owns a water pump. Because pumping largeamounts of water is harder than pumping smallamounts, the cost of producing a bottle of waterrises as he pumps more. Here is the cost he incurs toproduce each bottle of water:Cost of first bottle $1Cost of second bottle $3Cost of third bottle $5Cost of fourth bottle $7a. From this information, derive Ernie’s supplyschedule. Graph his supply curve for bottledwater.b. If the price of a bottle of water is $4, how manybottles does Ernie produce and sell? How muchproducer surplus does Ernie get from thesesales? Show Ernie’s producer surplus in yourgraph.c. If the price rises to $6, how does quantity suppliedchange? How does Ernie’s producer surpluschange? Show these changes in your graph
Chapter 7 Solutions
Principles of Microeconomics
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