Bob 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:$2Cost of second bottle:$4Cost of third bottle:$6Cost of fourth bottle:$8

From this information, complete the following table by deriving Bob's supply schedule.

PriceQuantity Supplied$2 or less$2 to $4$4 to $6$6 to $8More than $8

Based on Bob's willingness to sell, plot his supply curve as a step function on the following graph using the orange points (square symbol). Be sure to plot your first point at (0, 0).

Bob's Supply

Price = $5

Quantity Sold

Producer Surplus

0

1

2

3

4

5

10

9

8

7

6

5

4

3

2

1

0

Price of Water

Quantity of Water

Suppose the price of a bottle of water is $5.

Use the black line (plus symbol) to draw a price line at $5. Next use the grey point (star symbol) to indicate how many bottles of water Bob will produce and sell at that price. Finally, use the purple point (diamond symbol) to shade the area that represents Bob's producer surplus.

In this case, Bob receivesin producer surplus from his water sales.

If the price rises to $7, Bob now sellsbottles of water. This his producer surplus to.