# Tute_4answers - Introductory microeconomics ECON1001...

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ECON1001 Tutorial 4 1 Introductory microeconomics ECON1001 Tutorial 4 Week 5 1. Freddie can make a widget for a marginal cost of \$10. Harriet values the widget at \$50. a. What is the maximum price Harriet is willing to pay? \$50 b. What is the minimum price Freddie is willing to sell the widget for? \$10 c. What is the consumer and producer surplus if the price is \$25? What is the total surplus if the price is \$10, \$20 and \$50? Use definitions of consumer and producer surplus to get answers 2. a Loaves TC MC 0 20 1 22 2 2 26 4 3 32 6 4 40 8 5 50 10 6 62 12 7 76 14 b. Figure 2 is the supply curve for Jackson’s Bakery (the table suggests a linear relationship, but it would also be correct if you drew a ‘stepped’ supply curve). c. Six units maximise profits at \$12 per loaf. Producer surplus is the area below the \$12 line and above the supply curve. d. below the \$12 line and above the supply curve. 3 6 9 12 15 1 2 3 4 5 6 7 8 9 Supply Curve \$ Loaves Producer Surplus y x 0

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ECON1001 Tutorial 4 2 3. Consider the demand function to be qd = 100 – 5P and the supply function to be qs = 5P.
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