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 ```3) It is a hot day, and Bert is thristy. Here is the value he places on a bottle of water: Value if first bottle \$7 value of second bottle 5 value of third bottle 3 value of fourth bottle 1 a) from this information, derive Bert's demand schedule. Graph his demand curve for bottled water. b)If the price of a bottle of water is \$4, how many bottles does Bert buy? How much consumer surplus does Bert get from his purchases? Show Bert's consumer surplus in your graph. c) If the price falls to \$2, how does quantity demanded change? How does Bert's consumer surplus change? Show these changes in your graph. 4)Ernie owns awater pump. Because pumping large amounts of water is harder than pumping small amouonts, the cost of producing a bottle rises as he pumps more. Here is the cost he incurs to produce each bottle of water: cost of first bottle \$1 cost of second bottle 3 costs of third bottle 5 cost of fourth bottle 7 a) from this information, derive Ernie's supply schedule. Graph his supply curve for bottled water. b)if theprice of a bottle of water is \$4, How many bottles does Ernie produce and sell? How much producer surplus does Ernie get from these sales?Show Ernie's producer surplus in your graph. c) If the price rises to \$6, how does quantity supplied change? How does Ernie's producer surplus change? Show these changes in your graph. 5) Consider a market in which Bert from problem 3 is the buyer and Ernie from problem 4 is the seller. a)Use Ernie's supply schedule and Bert's demand schedule to find the quantity supplied and quantity demanded at prices of \$2, \$4, and \$6. Which of these prices brings supply and demand into equilibrium? b) What are consumer surplus, producer surplus, and total surplus in this equilibrium? c)If Ernie produced and Bert consumed one fewer bottles of water, what would happen to total surplus? d)If Ernie produced and Bert consumed one additional bottle of water, what would happen to total surplus?```
 ```3) a) "demand curve (or demand schedule). A schedule or curve showing the quantity of a good that buyers would purchase at each price, other things equal. Normally a demand curve has price on the vertical or y-axis and quantity demanded on the horizontal or x-axis." Page 734 So, we plot Bert's demand by placing dots at the intersection of \$7 and 1, \$5 and 2, \$3 and 3, and \$1 and 4, and then drawing a line connecting them. b) " Consumer surplus. The difference between the amount that a consumer would be willing to pay for a commodity and the amount actually paid. This difference arises because the marginal utilities (in dollar terms) of all but the last unit exceed the price. Hence the monetary equivalent of the total utility of the commodity consumed may be well above the amount spent. Under rigorous assumptions, the money value of consumer surplus can be measured (using a demand-curve diagram) as the area under the demand curve but above the price line." Page 732 A line drawn across the graph at \$4 intersects the demand curve at a quantity of 2.5, so Bert buys two bottles. Using the definition of consumer surplus, we find that Bert has obtained a surplus of four dollars. c) a line drawn across the graph at \$2 intersects the demand curve at a quantity of 3.5, so Bert buys three bottles. Using the definition of consumer surplus, we find the Bert has achieved a surplus of nine dollars. 4) a) "supply curve (or supply schedule). A schedule showing the quantity of a good that suppliers in a given market desire to sell it each price, holding other things equal." Page 747 So, we plot Ernie's supply by placing dots at the intersection of \$1 and 1, \$3 and 2, \$5 and 3, and \$7 and 4, and then drawing a line connecting them. b) a line drawn across the graph at \$4 intersects the supply curve at a quantity of 2.5, so Ernie sells two bottles. His producer surplus is four dollars. c) a line drawn across the graph at \$6 intersects the supply curve at a quantity of 3.5, so Ernie sells three bottles. His producer surplus is nine dollars. 5) a) the demand curve and the supply curve intersect at four dollars. This is the equilibrium point. At two dollars, four dollars, and six dollars, Bert demands three bottles, two bottles, and one bottle, respectively. At two dollars, four dollars, and six dollars, Ernie supplies one bottle, two bottles, and three bottles, respectively. b) at equilibrium, both the consumer surplus and the producer surplus are four dollars, making the total surplus eight dollars. c) if Ernie produces and Bert consumes one fewer bottle of water, assuming the equilibrium price is maintained at four dollars, each achieves a three dollar surplus, resulting in a total surplus of six dollars. d) if Ernie produces and Bert consumes one additional bottle of water, assuming the equilibrium price is maintained at four dollars, each incurs a deficit of one dollar, yielding a total deficit of two dollars. Source: "Economics" 14th edition by Samuelson & Nordhaus, McGraw-Hill Inc., 1992 Sincerely, Wonko```