What is the producer surplus in the whole neighborhood

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Problem

Suppose we have a neighborhood where four of the neighbors produce candles to sell on the open market. The Current market price $4/candle. Assume the neighbors can only supply 1 candle to the market at this time. Using the table below, answer the following questions Neighbor Production Cost(Marginal Cost) 1 $2 2 $5 3 $6 4 $3

-Which neighbors chose to produce candles?

-What is the producer surplus of each neighbor?

-What is the producer surplus in the whole neighborhood?

-Suppose now that the price increases to $7/candle. Which neighbors choose to produce, and what are their individual levels of producer surplus?

-Still assuming the price is $7/candle, what is the new level of producer surplus in the whole neighborhood?

-What do you notice about the firms that have lower production costs? What does an increase in prices mean for their well-being?

Reference no: EM131984593

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