Question

4. Producer surplus for an individual and a market Suppose the market for gourmet cupcakes is perfectly competitive, so sellers take the market price as given. Lorenzo manages a bakery that offers gourmet cupcakes for sale. The following graph plots Lorenzo's weekly supply curve (orange line). Point A represents a point along his supply curve. The price of gourmet cupcakes is $2.50 per cupcake, which is given by the black horizontal line. PRICE (Dollars per cupcake) Lorenzo's Weekly Supply 5.50 5.00 4.50 4.00 3.50 3.00 2.50 Price 2.00 Supply 1.50 1.00 0.50 0 0 2 4 6 8 10 12 14 16 18 20 22 24 QUANTITY (Cupcakes) Using the previous graph, you can determine that Lorenzo is willing to supply his 2nd weekly cupcake for $ _. Since he receives $2.50 per cupcake, the producer surplus earned from supplying the 2nd cupcake is $ Suppose the price of gourmet cupcakes were to rise to $3.00 per cupcake. At this higher price, Lorenzo would receive a producer surplus of $ from the 2nd cupcake he sells. The following graph plots the weekly market supply curve (orange line) for gourmet cupcakes in a hypothetical small economy. Use the purple point (diamond symbol) to shade the area representing producer surplus (PS) when the price (P) of gourmet cupcakes is $2.50 per cupcake. Then, use the green point (triangle symbol) to shade the area representing additional producer surplus when the price rises to $3.00 per cupcake. Small Economy's Weekly Supply 6.00 P= $3.00 5.50 5.00 P=$2.50 4.50 4.00 3.50 3.00 PRICE (Dollars per cupcake) 2.50 2.00 Supply 1.50 1.00 0.50 0 0 24 48 72 96 120 144 168 192 216 240 264 288 QUANTITY (Thousands of gourmet cupcakes) Initial PS (P=$2.50) Additional PS (P=$3.00)

          4. Producer surplus for an individual and a market
Suppose the market for gourmet cupcakes is perfectly competitive, so sellers take the market price as given. Lorenzo manages a bakery that offers
gourmet cupcakes for sale. The following graph plots Lorenzo's weekly supply curve (orange line). Point A represents a point along his supply curve.
The price of gourmet cupcakes is $2.50 per cupcake, which is given by the black horizontal line.
PRICE (Dollars per cupcake)
Lorenzo's Weekly Supply
5.50
5.00
4.50
4.00
3.50
3.00
2.50 Price
2.00 Supply
1.50
1.00
0.50
0
0 2 4 6 8 10 12 14 16 18 20 22 24
QUANTITY (Cupcakes)
Using the previous graph, you can determine that Lorenzo is willing to supply his 2nd weekly cupcake for $ _____. Since he receives $2.50 per
cupcake, the producer surplus earned from supplying the 2nd cupcake is $
Suppose the price of gourmet cupcakes were to rise to $3.00 per cupcake. At this higher price, Lorenzo would receive a producer surplus of
$ ____ from the 2nd cupcake he sells.
The following graph plots the weekly market supply curve (orange line) for gourmet cupcakes in a hypothetical small economy.
Use the purple point (diamond symbol) to shade the area representing producer surplus (PS) when the price (P) of gourmet cupcakes is $2.50 per
cupcake. Then, use the green point (triangle symbol) to shade the area representing additional producer surplus when the price rises to $3.00 per
cupcake.
Small Economy's Weekly Supply
6.00
P= $3.00
5.50
5.00
P=$2.50
4.50
4.00
3.50
3.00
PRICE (Dollars per cupcake)
2.50
2.00 Supply
1.50
1.00
0.50
0
0 24 48 72 96 120 144 168 192 216 240 264 288
QUANTITY (Thousands of gourmet cupcakes)
Initial PS (P=$2.50)
Additional PS (P=$3.00)

4. Producer surplus for an individual and a market
Suppose the market for gourmet cupcakes is perfectly competitive, so sellers take the market price as given. Lorenzo manages a bakery that offers
gourmet cupcakes for sale. The following graph plots Lorenzo's weekly supply curve (orange line). Point A represents a point along his supply curve.
The price of gourmet cupcakes is 2.50 per cupcake, which is given by the black horizontal line.
PRICE (Dollars per cupcake)
Lorenzo's Weekly Supply
5.50
5.00
4.50
4.00
3.50
3.00
2.50 Price
2.00 Supply
1.50
1.00
0.50
0
0 2 4 6 8 10 12 14 16 18 20 22 24
QUANTITY (Cupcakes)
Using the previous graph, you can determine that Lorenzo is willing to supply his 2nd weekly cupcake for . Since he receives 2.50 per
cupcake, the producer surplus earned from supplying the 2nd cupcake is
Suppose the price of gourmet cupcakes were to rise to 3.00 per cupcake. At this higher price, Lorenzo would receive a producer surplus of from the 2nd cupcake he sells.
The following graph plots the weekly market supply curve (orange line) for gourmet cupcakes in a hypothetical small economy.
Use the purple point (diamond symbol) to shade the area representing producer surplus (PS) when the price (P) of gourmet cupcakes is 2.50 per
cupcake. Then, use the green point (triangle symbol) to shade the area representing additional producer surplus when the price rises to3.00 per
cupcake.
Small Economy's Weekly Supply
6.00
P= 3.00
5.50
5.00
P=2.50
4.50
4.00
3.50
3.00
PRICE (Dollars per cupcake)
2.50
2.00 Supply
1.50
1.00
0.50
0
0 24 48 72 96 120 144 168 192 216 240 264 288
QUANTITY (Thousands of gourmet cupcakes)
Initial PS (P=2.50)
Additional PS (P=3.00)

Added by Rachel M.

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