QUESTION 2 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: Bottle of water Cost Cost of first bottle $1 Cost of second bottle 3 Cost of third bottle 5 Cost of fourth bottle T" 1. From this information, derive Ernie's supply schedule. (5 marks} 2. Graph his supply curve for bottled water. (5 marks) 3. If the price of a bottle of water is 34, how many bottles does Ernie produce and sell? How much producer surplus does Ernie get from these sales? Graph his supplyr curve for bottled water. [5 marks) 4. If the price rises to 56, how does quantityr supplied change? How does Ernie's producer surplus change? Show these changes in your graph. (5 marks) TOTAL MARKS - 20