Question 1 If the marginal benefit of a product moves from $50 at one quantity to $30 at the second quantity to $10 at the third quantity... and the marginal cost is always $25,

(a) how many of the product would you sell, if you could sell whatever quantity you produce (show your reasoning);

(b) draw a graph of marginal benefit and total benefit for quantities 0-3, with proper vertical and horizontal descriptions;

c) draw a graph of (a) indicating where you would STOP producing and indicate the appropriate equation.

Question 2: Suppose that a product producer's supply curve (not the market demand curve) for the product is as follows:

At $20, the supplier will supply 1 unit; at $30, they will supply 2 units; at $40, they will supply 3 units; at $50, they will supply 4 units; at $60, they will supply 5 units.

Required: (a) If the price of the product is $40, draw the equilibrium, and show but don't calculate the producer surplus ( not the consumer surplus);

(b) If the price of the product rises from $40 to $50,

(i) draw the new supply and demand quantities, and answer who wins at that price of $50

(ii) Is the consumer surplus higher or lower or the same if the price of the product rises to $50 ? (draw but don't calculate) ,and

(iii) Would you expect there to be a surplus gap or a shortage gap at a price of $50? Explain and show the gap on a graph.