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Chapters 8 and 10 Practice A - Answers 1. True/False: “If Jack Daniel’s whiskey sells for \$10 per bottle and if 1,000 bottles were sold last year, then the total value of those bottles to consumers was \$10,000.” Explain your answer. False. The cost to consumers is \$10,000. The total value to consumers includes that, but it also includes any amount they were willing to pay above \$10 per bottle. So the total value to consumers is greater than \$10,000. 2. #26 on page 268 in the 7 th edition of your book (#23 on page 280 of the 6 th edition) In order for American consumers to want exactly 500 foreign widgets, the price to them of a foreign widget must be \$6 (see graph below). Of this, \$2 goes to the foreign widget maker, so \$4 must be the price of a ration ticket. 1

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3. A monopolistic firm produces widgets at a constant marginal cost of \$10 each. One day, it discovers a new production process that would lower its marginal cost by \$1 per widget. Use a graph to show how much its producer surplus will increase if it adopts the new production
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