Answered: The following graph plots a supply…

Economics Today and Tomorrow, Student Edition

1st Edition

ISBN:9780078747663

Author:McGraw-Hill

Publisher:McGraw-Hill

Chapter5: Buying The Necessities

Section5.2: Cloting Choices

Problem 1R

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The following graph plots a supply curve (orange line) for several sellers in the market for motor scooters in College Park, a university town in Maryland. Each seller has a single-motor scooter for sale. The market price of motor scooters is given by the horizontal black line at $70.

Each rectangle on the graph corresponds to a particular seller in this market: blue (circle symbols) for Kevin, green (triangle symbols) for Maria, purple (diamond symbols) for Rajiv, tan (dash symbols) for Simone, and orange (square symbols) for Yakov. (Note: The name labels are to the right of the corresponding segment on the supply curve.)

Use the rectangles to shade the areas representing producer surplus for each person who is willing to sell a motor scooter at a market price of $70. (Note: If a person will not sell a motor scooter at the market price, indicate this by leaving their rectangle in its original position on the palette.)

Based on the information on the preceding graph, you can tell that ________ will sell motor scooters at the given market price, and total producer surplus in this market will be $______.

Suppose the market price of a motor scooter increases to $110.

On the following graph, use the rectangles once again to shade the areas representing producer surplus for each person who is willing to sell a motor scooter at the new market price: blue (circle symbols) for Kevin, green (triangle symbols) for Maria, purple (diamond symbols) for Rajiv, tan (dash symbols) for Simone, and orange (square symbols) for Yakov. (Note: If a person will not sell a motor scooter at the new market price, indicate this by leaving their rectangle in its original position on the palette.)

Based on the information in the second graph, when the market price of a motor scooter increases to $110, the number of sellers willing to sell a motor scooter ______ to ______ , and total producer surplus ______ to $______.

PRICE (Dollars per motor scooter)
160
140
120
100
80
60
40
20
0
0
1
Kevin
2
Maria
Rajiv
Yakov
Simone
3
4
5
QUANTITY (Motor scooters)
Market Price
6
7
8
Kevin
Maria
Rajiv
Simone
Yakov
?

Expert Solution

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Producer surplus is the area above the supply curve and below the market price. It is the difference between market price and minimum price sellers are willing to accept.

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