As a eco-tourism site, the Kubak crystal caves are renowned for their stalactites and stalagmites. The warden of the caves offers a tour each afternoon at 2pm sharp. The caves can be shown to only four people per day without disturbing their fragile ecology. Occasionally, however, more than four people want to see the caves on the same day. The following schedule lists the people who wanted to see the caves on September 24, 2003, together with their respective times of arrival and reservation prices for taking the tour that day. Customers Arrival Time Reservation price Herman 1:48 P 20 Jon 1:50 14 Kate 1:53 30 Jack 1:56 15 Penny 1:57 40 Fran 1:59 12 Faith 2:00 17 a.) If the tour is “free” and the warden operates on a first-come, first-served basis, what will the total consumer surplus be for the four people who get to go on the tour that day? b.) Suppose the warden solicits volunteers to postpone their tour by offering increasing amounts of cash compensation until only four people still wish to see the caves that day. If he gives each volunteer the same compensation payment, how much money will he have to offer to generate the required number of volunteers? What is the total surplus under this policy?
ANSWER LETTER A
As a eco-tourism site, the Kubak crystal caves are renowned for their stalactites and stalagmites.
The warden of the caves offers a tour each afternoon at 2pm sharp. The caves can be shown to
only four people per day without disturbing their fragile ecology. Occasionally, however, more than
four people want to see the caves on the same day. The following schedule lists the people who
wanted to see the caves on September 24, 2003, together with their respective times of arrival and
reservation prices for taking the tour that day.
| Customers | Arrival Time | Reservation price |
| Herman | 1:48 | P 20 |
| Jon | 1:50 | 14 |
| Kate | 1:53 | 30 |
| Jack | 1:56 | 15 |
| Penny | 1:57 | 40 |
| Fran | 1:59 | 12 |
| Faith | 2:00 | 17 |
a.) If the tour is “free” and the warden operates on a first-come, first-served basis, what will the total
b.) Suppose the warden solicits volunteers to postpone their tour by offering increasing amounts of cash compensation until only four people still wish to see the caves that day. If he gives each volunteer the same compensation payment, how much money will he have to offer to generate the required number of volunteers? What is the total surplus under this policy?
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