Question 6

In the following table, indicate which statements are true or false based on the information provided on the previous graph. Statement True False Producer surplus is smaller when the price is $210 than when it is $150. (] O Assuming each seller receives a positive surplus, Susan will always receive more producer surplus than alex. (] In order for Eileen to earn a producer surplus of exactly $60 from selling a used textbook, the market price must be . 6. Producer surplus and price changes The following graph plots a supply curve {orange line) for a group of recent graduates looking to sell used art history textbooks. Each seller has only a single used textbook available for sale. Think of each rectangular area beneath the supply curve as the \"cost,\" or minimum price that each seller is willing to accept. Assume that anyone who has a cost that equals the market price is willing to sell their used textbook. @ 360 300 Eileen 240 Clancy 180 i Becky 120 PRICE (Dollars per used texthool) 80 Raphasl o > o 1 2 3 4 5 8 QUANTITY (Used textbooks) Region X (the purple shaded area) represents total producer surplus when the market price is equal I:oI while Region (the grey shaded area) represents w when the market price v . 7. Producer surplus for an individual and a market Suppose the market for gourmet cupcakes is perfectly competitive, so sellers take the market price as given. Yvette manages a bakery that offers gourmet cupcakes for sale. The following graph plots Yvette's weekly supply curve {orange line). Point A represents a point along her supply curve. The price of gourmet cupcakes is $2.25 per cupcake, which is given by the black horizontal line. @ Yvette's Weekly Supply .00 8.25 7.50 8.75 8.00 5.25 450 375 3.00 PRICE (Dollars per cupcake) 225 1.50 0.75 02 4 6 & 10 12 14 18 18 20 22 24 QUANTITY (Cupcakes) Using the previous graph, you can determing that Yvette is willing to supply her 6th weekly cupcake for . Since she receives $2.25 per cupcake, the producer surplus earned from supplying the 6th cupcake is. Suppose the price of gourmet cupcakes were to rise to $3.00 per cupcake. At this higher price, Yvette would receive a producer surplus of 3 from the oth cupcake she sells. The following graph plots the weekly market supply curve (orange line) for gourmet cupcakes in a hypothetical small economy. Use the purple point (diamond symbol) to shade the area representing producer surplus (PS) when the price (P) of gourmet cupcakes is $2.25 per cupcake. Then, use the green point (triangle symbol) to shade the area representing additional producer surplus when the price rises to $3.00 per cupcake. Small Economy's Weekly Supply .00 8.25 7.50 1 Initial PS (P=52.25) Tl A 6.00 Additional PS (P=83.00) n [ en PRICE (Daollars per cupcake) upply 0 24 48 72 05 120 144 168 102 216 240 264 288 QUANTITY (Thousands of gourmet cupcakes) Grade It Now G R 1T 8. Total economic surplus The following graph plots the supply and demand curves in the market for motor scooters. Use the black point (plus symbol) to indicate the equilibrium price and quantity of motor scooters. Then use the green point (triangle symbol) to fill the area representing consumer surplus, and use the purple point {diamond symbol) to fill the area representing producer surplus. @ 250 e 225 . Demand Equilibrium 200 - N s = = & 150 Consumer Surplus o o : - 2 = oo Producer Surplus o 75 o 0 25 50 75 100 125 150 175 200 225 250 QUANTITY (Millions of scooters) Total surplus in this market is million