Suppose the market for breakfast muffins is perfectly competitive, so sellers take the market price as given. Kyoko manages a bakery that offers breakfast muffins for sale. The following graph plots Kyoko's weekly supply curve (orange line). Point A represents a point along her supply curve. The price of breakfast muffins is $2.25 per muffin, which is given by the black horizontal line.
Kyoko's Weekly Supply
0
2
4
6
8
10
12
14
16
18
20
22
24
9.00
8.25
7.50
6.75
6.00
5.25
4.50
3.75
3.00
2.25
1.50
0.75
0
PRICE (Dollars per muffin)
QUANTITY (Muffins)
Supply
Price
A
Using the previous graph, you can determine that Kyoko is willing to supply her 6th weekly muffin for . Since she receives $2.25 per muffin, the producer surplus earned from supplying the 6th muffin is.
Suppose the price of breakfast muffins were to rise to $3.00 per muffin. At this higher price, Kyoko would receive a producer surplus offrom the 6th muffin she sells.
The following graph plots the weekly market supply curve (orange line) for breakfast muffins in a hypothetical small economy.
Use the purple point (diamond symbol) to shade the area representing producer surplus (PS) when the price (P) of breakfast muffins is $2.25 per muffin. Then, use the green point (triangle symbol) to shade the area representing additional producer surplus when the price rises to $3.00 per muffin.
Small Economy’s Weekly Supply
Initial PS (P=$2.25)
Additional PS (P=$3.00)
0
24
48
72
96
120
144
168
192
216
240
264
288
9.00
8.25
7.50
6.75
6.00
5.25
4.50
3.75
3.00
2.25
1.50
0.75
0
PRICE (Dollars per muffin)
QUANTITY (Thousands of breakfast muffins)
Supply
P=$2.25
P=$3.00