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Consider a market in which Bert from problem 4 is the buyer and Ernie from problem 5 is the seller. a. Use Ernie’s supply schedule and Bert’s demand schedule to find the quantity supplied and quantity demanded at prices of $2, $4, and $6. Which of these prices brings supply and demand into equilibrium? b. What are consumer surplus, producer surplus, and total surplus in this equilibrium? c. If Ernie produced and Bert consumed one fewer bottle of water, what would happen to total surplus? d. If Ernie produced and Bert consumed one additional bottle of water, what would happen to total surplus?

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Principles of Macroeconomics (Mind...

8th Edition
N. Gregory Mankiw
Publisher: Cengage Learning
ISBN: 9781305971509
BuyFind

Principles of Macroeconomics (Mind...

8th Edition
N. Gregory Mankiw
Publisher: Cengage Learning
ISBN: 9781305971509

Solutions

Chapter
Section
Chapter 7, Problem 6PA
Textbook Problem

Consider a market in which Bert from problem 4 is the buyer and Ernie from problem 5 is the seller.

a. Use Ernie’s supply schedule and Bert’s demand schedule to find the quantity supplied and quantity demanded at prices of $2, $4, and $6. Which of these prices brings supply and demand into equilibrium?

b. What are consumer surplus, producer surplus, and total surplus in this equilibrium?

c. If Ernie produced and Bert consumed one fewer bottle of water, what would happen to total surplus?

d. If Ernie produced and Bert consumed one additional bottle of water, what would happen to total surplus?

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