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Answer Key Homework #2
Q.1
Problem 4 on page 152
b.
If the price of a bottle is $4, then Bert will buy 2 bottles.
As seen in the graph above, he
will get $3 (=$7$4) consumer surplus from the first bottle.
From the second bottle, he
will get $1 consumer surplus.
The total consumer surplus will be then $4.
The area of
consume surplus is shown as a shaded area in the graph above.
c.
If the price drops to $2, then the quantity demanded will change to 3 bottles.
Then,
Burt’s consumer surplus will change to $9(=$5+$3+$1).
The area of new consumer
surplus after the change is shown in the graph above.
Q.2
Problem 5 on page 152
b.
1
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View Full Document If the price of a bottle is $4, then Ernie will produce and sell buy 2 bottles.
As seen in the
graph above, he will get $3 (=$4$1) producer surplus from the first bottle.
From the
second bottle, he will get $1 producer surplus.
The total producer surplus will be then $4.
The area of producer surplus is shown as a shaded area in the graph above.
c.
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This note was uploaded on 05/16/2011 for the course ECON 500b taught by Professor Park during the Spring '11 term at Cal Poly Pomona.
 Spring '11
 Park
 Consumer Surplus

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