Written Assignment 2

Written Assignment 2 - Written Assignment 2-Principles of...

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Written Assignment 2/-Principles of Microeconomics – N. Gregory Mankiw- Fifth Edition – ISBN 0324-58998-0)I Answer all of the following questions. Title your assignment "Written Assignment 2," unless your mentor directs otherwise. This assignment covers text chapters 7 through 12. 1. Answer each of the following questions on supply and producer surplus. a. What is producer surplus, and how is it measured? Producer surplus is the amount a producer benefits monetarily from selling a product at a price above the amount it cost to make the product. Producer surplus is measured as the difference that a producer is willing and able to supply a product for and the price the producer actually gets paid for the product. It is the amount or level or producer surplus is shown above the supply curve and below the market price. b. What is the relationship between the cost to sellers and the supply curve? Producers take into account several factors before producing a product: land, labor, and capital to make the product they want to sell. In producing said good, cost are going to be incurred and the price received by the sellers should be a combination of what it cost to produce the product and sometimes a profit. So let’s say a producer wants to increase the amount they want to produce, they are going to incur some additional costs of the raw materials needed to make the increase of the product. The supply curve shows the quantity supplied as a function of the price it is provided. A movement along the supply curve to a new quantity represents the effect of a change in price. c. Other things equal, what happens to producer surplus when the price of a good rises? An increase in the price of a good would basically cause an increase in producer surplus. Some producers, producing at Q1 and selling at P1 may not feel the surplus and may start receiving more for the products they sell 2. There are four consumers willing to pay the following for a haircut: Consumer Willing to Pay: Ricki $8.00 Oprah $7.00 Jerry $5.00 Montel $2.00
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3. And there are four businesses with the following cost per haircut: Business Haircut Price: A Kutz $3.00 B Kutz $6.00 C Kutz $4.00 D Kutz $2.00 4. Each business can produce no more than one haircut. a. In the most efficient world, which companies should cut hair and which customers should get a haircut? (Note: It might be less than 4.) Ricki, Oprah, Jerry and Montel should all get a hair cut from D Kutz because this business offers the greatest consumer surplus or and the price that the marginal buyer would spend of $2.00. All other business should not cut being in the hair cutting business because they are not able to produce a haircut at the same price as D Kutz therefore the consumer will not choose them. b.
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Written Assignment 2 - Written Assignment 2-Principles of...

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