Use the following data to answer the questions.

a. For the product shown, assume that the minimum point of each firm€™s average variable cost curve occurs at a price of $2. Construct a demand and supply diagram for the product and indicate the equilibrium price and quantity.
b. On the graph, label the area of consumer surplus as f. Label the area of producer surplus as g.
c. If the equilibrium price were $2, what would be the amount of producer surplus?

Transcribed Image Text:

Quanity Marginal Cost Marginal Valuation $2 $3 $4 $5 $6 $8 $10 $12 $10