5 Ernie owns a water pump. Because pumping large amounts of water is harder than pumping small amounts, the cost of producing a bottle of water rises as he pumps more.

Here is the cost he incurs to produce each bottle of water:

Cost of first bottle Cost of second bottle Cost of third bottle Cost of fourth bottle

$2

$3

$4

$5 a From this information, derive Ernie's supply schedule. Graph his supply curve for bottled water.

b If the price of a bottle of water is $2.50, 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.