Answer
a) Please see the picture.
b) Ernie sells two bottles, and his surplus is 4 dollars.
c) Ernie sells three bottles, and his surplus is 9 dollars.
Work Step by Step
a) The first image shows the demand schedule and the demand curve.
b) Ernie would be willing to receive 1 dollar for his first bottle but earns 4 dollars. He would be willing to receive 3 dollars for his second bottle but earns 4 dollars. His surplus from the first bottle is 3 dollars (4-1), and his surplus from the second bottle is a dollar (4-3). This surplus is area A on the second graph.
c) Ernie would be willing to earn a dollar for his first bottle but earns 6 dollars. He would be willing to earn 3 dollars for his second bottle but receives 6 dollars. He would be willing to receive 5 dollars for his third bottle but receives 6 dollars. His surplus from the three bottles is (6−1)+(6−3)+(6−3), which is 9 dollars. The surplus is areas A+B on the second graph.
