For question 1 suppose the inverse supply of coal from a par

For question 1, suppose the inverse supply of coal from a particular mine is given by P=0.1Q.

1. A). Graph inverse supply. Assuming the market price of coal is p = $150,

calculate and label:

(1) Quantity supplied

(2) MWTA by producers

(3) Marginal costs (MC) of production

(4) WTA by producers

(5) Total variable costs (TVC)

(6) Total Revenue, and

(7) Producer Surplus (PS)

B). Suppose that, to help conserve coal for the future, the government restricts coal

production in this mine to Q = 1000 (which is, presumably the point where MSC = price).

Also assume that production within this one mine does not affect the market price, which

remains at $150. What type of rents does this policy create? Graph and calculate the

various types of rents that make up producer’s surplus. Indicate the imputed marginal

user cost (MUC).

Given, P = 0.1Q

P = $150

Therefore, 0.1Q = 150

Q = 1,500 units

1. Quantity supplied = 1,500 units

2. MWTA by producer is $150

3. PQ = 0.1Q^2; MC = Derivative of PQ = 0.2Q = 0.2 × 1,500 = $300

4. WTA = $150

5. TVC = $150 × 1,500 = $225,000

6. Total revenue = $150 × 1,500 = $225,000

7. PS = 0