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
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
bottles does Ernie produce and sell? How much
sales? Show Ernie’s producer surplus in your
graph.
c. If the price rises to $6, how does quantity supplied
change? How does Ernie’s producer surplus
change? Show these changes in your graph
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 4 images
