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 $1Cost of second bottle 3Cost of third bottle 5Cost of fourth bottle 7From this information, derive Ernie’s supply schedule. Graph his supply curve for bottled water.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? Show Ernie’s producer surplus in your graph. If the price rises to $6, how does quantity supplied change?

The law of supply is an important microeconomic concept that derives the positive correlation…

Answered: Ernie owns a water pump. Because…

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter7: Consumers, Producers, And The Efficiency Of Markets

Section: Chapter Questions

Problem 5PA

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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

From this information, derive Ernie’s supply schedule. Graph his supply curve for bottled water.
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? Show Ernie’s producer surplus in your graph. If the price rises to $6, how does quantity supplied change?

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