7. Producer surplus for an individual and a market Suppose the market for cheesecake is a perfectly competitive market-that is, sellers take the market price as given. Sean owns a restaurant where he sells cheesecake. The following graph shows Sean's weekly supply curve, represented by the orange line. Point A represents a point along his supply curve. The price of cheesecake is $3.00 per slice, as shown by the horizontal black line. Sean's Weekly Supply 7.50 6.75 6.00 5.25 4.50 3.75 3.00 Price 225 1.50 0.75 Supply 4. 10 12 14 16 18 20 QUANTITY (Slices of cheesecake) PRICE (Dollars per slice) From the previous graph, you can tell that Sean is willing to supply his 8th slice of cheesecake for each week. Since he receives $3.00 per slice, the producer surplus he gains from supplying the 8th slice of cheesecake is s Suppose the price of cheesecake were to rise to $3.75 per slice. At this higher price, Sean would receive a producer surplus of s from the 8th slice of cheesecake he sells. The following graph shows the weekly market supply of cheesecake in a small economy. Use the purple point (diamond symbol) to shade the area representing producer surplus (PS) when the price (P) of cheesecake is $3.00 per slice. Then, use the green point (triangle symbol) to shade the area representing additional producer surplus when the price rises to $3.75 per slice. Small Economy's Weekly Supply 7.50 6.75 Initial PS (P=$3.00) 6.00 525 4.50 Additional PS (P=$3.75) P=$3.75 3.75 3.00 P=$3.00 2.25 1.50 0.75 Supply 20 40 60 100 120 140 160 180 200 QUANTITY (Thousands of slices of cheesecake) PRICE (Dollars per slice)
7. Producer surplus for an individual and a market Suppose the market for cheesecake is a perfectly competitive market-that is, sellers take the market price as given. Sean owns a restaurant where he sells cheesecake. The following graph shows Sean's weekly supply curve, represented by the orange line. Point A represents a point along his supply curve. The price of cheesecake is $3.00 per slice, as shown by the horizontal black line. Sean's Weekly Supply 7.50 6.75 6.00 5.25 4.50 3.75 3.00 Price 225 1.50 0.75 Supply 4. 10 12 14 16 18 20 QUANTITY (Slices of cheesecake) PRICE (Dollars per slice) From the previous graph, you can tell that Sean is willing to supply his 8th slice of cheesecake for each week. Since he receives $3.00 per slice, the producer surplus he gains from supplying the 8th slice of cheesecake is s Suppose the price of cheesecake were to rise to $3.75 per slice. At this higher price, Sean would receive a producer surplus of s from the 8th slice of cheesecake he sells. The following graph shows the weekly market supply of cheesecake in a small economy. Use the purple point (diamond symbol) to shade the area representing producer surplus (PS) when the price (P) of cheesecake is $3.00 per slice. Then, use the green point (triangle symbol) to shade the area representing additional producer surplus when the price rises to $3.75 per slice. Small Economy's Weekly Supply 7.50 6.75 Initial PS (P=$3.00) 6.00 525 4.50 Additional PS (P=$3.75) P=$3.75 3.75 3.00 P=$3.00 2.25 1.50 0.75 Supply 20 40 60 100 120 140 160 180 200 QUANTITY (Thousands of slices of cheesecake) PRICE (Dollars per slice)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:7. Producer surplus for an individual and a market
Suppose the market for cheesecake is a perfectly competitive market-that is, sellers take the market price as given. Sean owns a restaurant where
he sells cheesecake. The following graph shows Sean's weekly supply curve, represented by the orange line. Point A represents a point along his
supply curve. The price of cheesecake is $3.00 per slice, as shown by the horizontal black line.
Sean's Weekly Supply
7.50
6.75
6.00
5.25
4.50
3.75
3.00
Price
225
1.50
0.75
Supply
4.
10
12
14
16
18
20
QUANTITY (Slices of cheesecake)
PRICE (Dollars per slice)
Transcribed Image Text:From the previous graph, you can tell that Sean is willing to supply his 8th slice of cheesecake for
each week. Since he receives $3.00
per slice, the producer surplus he gains from supplying the 8th slice of cheesecake is s
Suppose the price of cheesecake were to rise to $3.75 per slice. At this higher price, Sean would receive a producer surplus of s
from the
8th slice of cheesecake he sells.
The following graph shows the weekly market supply of cheesecake in a small economy.
Use the purple point (diamond symbol) to shade the area representing producer surplus (PS) when the price (P) of cheesecake is $3.00 per slice.
Then, use the green point (triangle symbol) to shade the area representing additional producer surplus when the price rises to $3.75 per slice.
Small Economy's Weekly Supply
7.50
6.75
Initial PS (P=$3.00)
6.00
525
4.50
Additional PS (P=$3.75)
P=$3.75
3.75
3.00
P=$3.00
2.25
1.50
0.75
Supply
20
40
60
100
120
140
160
180
200
QUANTITY (Thousands of slices of cheesecake)
PRICE (Dollars per slice)
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