The marginal cost for Java Joe's to produce its first cup of coffee is $0.75. Its marginal cost to produce its second cup of coffee is $1.25. Its marginal cost increases by $0.50 for each additional cup of coffee it produces. Suppose the market price for
coffee is $2.25. Construct a graph showing the producer surplus for each cup of coffee Java Joe's will sell. How many cups of coffee will Java Joe's sell? What is the value of the producer surplus Java Joe's receives for each cup of coffee it sells?
What will be an ideal response?
Java Joe's will sell 3 cups of coffee. The producer surplus of the first cup of coffee is $1.50. The producer surplus of the second cup of coffee is $1.00. The producer surplus of the third cup of coffee is $0.50.
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