Chapter 49, Problem 2CYU

a)

To determine

Supply schedule for the product

Explanation of Solution

A producer supplies pepper if the price is greater than or equal to the cost of the producer for the good and no producer is willing to produce more than 4 at any price. Therefore, the table would consider the following market supply schedule:

Price of pepper	Quantity of peppers	Quantity of peppers demanded by C	Quantity of peppers demanded by J
$0.90	8	4	4
0.80	7	4	3
0.70	7	4	3
0.60	6	4	2
0.50	5	3	2
0.40	4	3	1
0.30	3	2	1
0.20	2	2	0
0.10	2	2	0
0.00	0	0	0

Economics Concept Introduction

Introduction: Supply schedule represents the tabular information about the quantity supplied and price of a good that producers are ready to supply at different prices.

b)

To determine

Total producer surplus at price $0.70

Explanation of Solution

Quantity of peppers	C’s cost	C’ssurplus at price 0.70	J’s cost	J’s surplus at price 0.70
1	$0.10	$0.60 (0.70-0.10)	$0.30	$0.40 (0.70-0.30)
2	0.10	0.60	0.50	0.20
3	0.40	0.30	0.70	0.00
4	0.60	0.10	0.90	-
Surplus: $1.60 $0.60

When the price is $0.70, C’s producer surplus from the first pepper is $0.60, $0.60 from the second, $0.30 from the third, $0.10 from the fourth, and after that C does not supply any pepper. Therefore, the total surplus of C is $1.60.

At $0.70, J’s producer surplus from the first pepper is $0.40, from the second $0.20, and after that J does not supply more. Therefore, the total surplus of J is $0.60.

Here, the total producer surplus at a price of $0.70 would be:

  $\begin{array}{c}\text{= C’s surplus+J’s surplus}\hfill \\ \begin{array}{l}=\$1.60+\$0.60\\ =\$\mathrm{2.20.}\end{array}\hfill \end{array}$

Economics Concept Introduction

Introduction: Any excess in production, earnings, or the supply of goods is called surplus which is more than the need.