Question

The following graph shows the supply curve for a group of students looking to sel used graphing calculators. Each student has only one used calculator to sell. Each rectangular segment under the supply curve represents the cost,' or minimum acceptable price for one student. Assume that anyone who has a cost just equal to the market price is willing to sell his or her used calculator Beth Andrew I . PRICE (Dolars per used calculator) . Teresa Lorenzo QUANTITY (Used calculators) MacBook Air

Answer 1

Region A represents the total produce a surplus from the market price is $60, while the region B represents the increase in producer surplus when the market price is $70.

The statement “Producer surplus is smaller when the price is $70 then when it is $60” is false because the producer surplus increases as the price increases.

The statement “ Assuming each student receives a positive surplus,Neha will always receive more producer surplus than Sam” is true. This is because producer surplus is the difference between the price and the minimum acceptable price, and the minimum acceptable price for Neha is lesser than the minimum acceptable price for Sam.

In order for Teresa to earn a producer surplus of exactly $10 from selling a used calculator, the market price needs to be $70. This is because, Teresa’s minimum acceptable price is $60 and jn order to earn a producer surplus of $10, market price has to be exactly $70.

From the given graph, you can tell that Ana is willing to pay $1.50 for her 8th slice of apple pie each week. Because she has to pay only $1.25 per slice, the consumer surplus she gains from the 8th slice of apple pie is $1.50 - $1.25 = $0.25.

Now, if the price of apple pie were to fall to $1.00 per slice, Ana would receive a consumer surplus of $1.50 - $1.00 = $0.50 from the 8th slice of apple pie she buys.

The consumer surplus when the price of apple pie was $1.25 per slice is the region below the demand curve and above the $1.25 price line. Now, when the price drops to $1.00 per slice, the additional consumer surplus is the region below the demand curve which is between the $1.25 price line and the $1.00 price line.

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