ah2 - Answer Key Homework #2 Q.1 Problem 4 on page 152 b....

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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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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.

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ah2 - Answer Key Homework #2 Q.1 Problem 4 on page 152 b....

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