Download 1 Assignment #9 ANSWERS Producer Surplus and Market

Dr. Shishkin
ECON 2106
Assignment #9
Fall 2010
ANSWERS
Producer Surplus and Market Efficiency
1. Explain why for an individual producing everything on his own and for the society as a
whole the MC curve tends to have a positive slope. (A hint: recall our discussion about
increasing opportunity cost and production possibilities that affect elasticity of the supply
curve)
2. Explain why the MC curve works exactly the same way that the supply curve for a
good works. Use the marginal analysis approach and note that for producers MC=P.
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Dr. Shishkin
ECON 2106
Fall 2010
3. Maria helps tutor students taking economics. The equilibrium price for tutoring is $15
per hour. Maria has determined her opportunity cost per hour to be $5 for the first, $8 for
the second, $11 for the third, $14 for the fourth, and $17 for the fifth. How many hours
will Maria tutor? Why this amount of hours? What is Maria's producer surplus? (Don’t
use “the triangle approximation”).
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Dr. Shishkin
ECON 2106
Fall 2010
Refer to this figure to answer the
following questions:
4.
What is the marginal cost of the 20th pizza?
5.
If the price is $6 per pizza, what is the producer surplus on the 20th pizza?
6.
If the price is $6 per pizza, what is the producer surplus for the total quantity of
pizzas produced?
7.
If the price is $8 per pizza, what is the producer surplus for the total quantity of
pizzas produced?
8.
If the price is $10 per pizza, what is the producer surplus for the total quantity of
pizzas produced?
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3
Dr. Shishkin
ECON 2106
Fall 2010
The figure above shows the market for hot dogs. In both cases below, explain what would
happen to the efficiency in such situation. Use this diagram to illustrate your answer.
9. Suppose that for whatever reason the production was limited to 25 hot dogs.
10. Suppose that for whatever reason the production was set at 100 hot dogs.
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