1. The following table shows the total costs of producing Cherries on a small plot of land.
   
   
   1. Calculate the marginal cost schedule.
   2. Draw the farmer’s supply curve.
   3. Suppose the price of one pound of cherries is $2. How much would this farmer produce? Show graphically the area of producer surplus. What are profits?
   4. Suppose the price of cherries goes up to $6 per pound. How much will the farmer produce now? What are profits now?
2. Compute the total revenue, total costs, and profits when the price of a crate of grapes is $80. How many crates of grapes will maximize profits? How does the answer compare to the price equals marginal cost condition?
3. The table below shows the cost schedule for Walworth Bakers.
   
   
   1. Calculate the marginal cost schedule for Walworth Bakers.
   2. Draw the firm’s supply curve.
   3. Walworth Bakers can sell as many loaves as it wants to at the market price $4 for a dozen muffins. How many muffins will this bakery sell each day? Use your diagram to show how much producer surplus the bakery receives.
4. Suppose you are able to baby-sit at $10 per hour. The only cost to you is the opportunity cost of your time. For the first 2 hours the opportunity cost of your time is $7 per hour. But after 2 hours, the opportunity cost of your time rises to $13 because of other commitments. Draw the marginal cost to you of babysitting. Draw in the price you receive for babysitting. For how long will you baby-sit? Calculate your producer surplus.
5. Suppose a price-taking firm has the following total cost schedule:
   
   
   1. Calculate marginal cost. If the price in the market is $15, how many units will the firm produce?
   2. Suppose the price in the market falls to $10 per unit. How many units of output will this firm produce in order to maximize profits?
   3. Suppose there is an improvement in technology that shifts total costs down by $10 at every level of production. How much will the firm produce and what will profits be at a price of $15 and at a price of $5?
6. Consider the following information:
   
   On the same diagram plot the total revenue and total cost curves for this firm. What is the maximum economic profit this firm can earn? How much will the entrepreneur earn when the firm is maximizing profits? Do the slopes of the two curves appear to be the same at the maximum profit level?
7. Using the information in PP6, find the fixed costs and the producer surplus when the firm produces the profit-maximizing quantity. What is the relationship between producer surplus and fixed costs?
8. What is the assumption of a competitive market and what are the implications of this assumption?