The marginal cost for Java Joe's to produce its first cup of coffee is $0.75. Its marginal cost to produce its second cup of coffee is $1.25. Its marginal cost increases by $0.50 for each additional cup of coffee it produces. Suppose the market price for
coffee is $2.25. Construct a graph showing the producer surplus for each cup of coffee Java Joe's will sell. How many cups of coffee will Java Joe's sell? What is the value of the producer surplus Java Joe's receives for each cup of coffee it sells?
What will be an ideal response?
Java Joe's will sell 3 cups of coffee. The producer surplus of the first cup of coffee is $1.50. The producer surplus of the second cup of coffee is $1.00. The producer surplus of the third cup of coffee is $0.50.
You might also like to view...
Suppose Cathy and Lewis work in a bakery making pies and cakes. Suppose it takes Cathy 1.5 hours to make a pie and 1 hour to make a cake, and suppose it takes Lewis 2 hours to make a pie and 1.5 hours to make a cake. Which of the following statements is correct?
A. Lewis should specialize in pies, and Cathy should specialize in cakes. B. Cathy should specialize in pies, and Lewis should specialize in cakes. C. Cathy should specialize in both pies and cakes. D. There are no gains from specialization and trade.
Expansionary fiscal policy:
What will be an ideal response?
If the percentage change in the quantity demanded of a good is less than the percentage change in price, price elasticity of demand is:
a. inelastic. b. elastic. c. unitary elastic. d. perfectly inelastic.
If the cyclically adjusted budget shows a deficit of about $200 billion and the actual budget shows a deficit of about $250 billion over a several-year period, it can be concluded that there is a:
A. contractionary fiscal policy. B. cyclical deficit. C. progressive tax system. D. proportional tax system.