Microeconomics (2nd Edition) (Pearson Series in Economics)
2nd Edition
ISBN: 9780134492049
Author: Daron Acemoglu, David Laibson, John List
Publisher: PEARSON
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Chapter 10, Problem 4P
(a)
To determine
Social surplus regardless of the
(b)
To determine
Effect of fees on the agreement and total surplus.
(c)
To determine
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Look at Tables together. What is the total surplus if Bob buys a unit from Carlos? If Barb buys a unit from Courtney? If Bob buys a unit from Chad? If you match up pairs of buyers and sellers so as to maximize the total surplus of all transactions, what is the largest total surplus that can be achieved?
Ivan has inherited his grandmother’s 1963 Chevrolet Corvette (trust me this is a hot car to own – if you watched Lucifer on TV you know it), which he values at $45,000. He decides that he might be willing to sell it so he posts it on Craigslist for $55,000. Samantha is interested and willing to pay up to $72,000. Would Ivan and Samantha want to voluntarily engage in trade? How much economic surplus is created for both of them as a result of this exchange? Show your calculations. What is the total economic surplus? Explain how you arrived at this number.
Assume all benefits (and costs) accrue to the buyers (and sellers) and the buyers and sellers interact in a market. Currently we have three buyers who value a good at $40. There are three possible sellers A, B, C whose marginal costs of production are $20, $30 and $50. Another seller, D, enters the market. D's marginal costs of production is $40. What is the change in surplus caused by D's entry?Do not include the $ sign and remember to include a negative sign if you want to say that surplus has decreased
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Microeconomics (2nd Edition) (Pearson Series in Economics)
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- The rent on an apartment in a particular building near campus is $1,200 per month. If Min would be willing to pay up to $1,400, Genevieve would be willing to pay up to $1,500, Fraser would be willing to pay up to $1,600, and Kayden would pay no more than $1,000, what is the consumer surplus for this group of students who would like to live in the building? Explain how you calculated this consumer surplusarrow_forwardIn the discussion of Figure 3, there is a set of numbers indicating how much different buyers would be willing to pay for a book. Construct a table for these buyers, like the first three columns in Table 1 Indicating their consumer surpluses.arrow_forwardQuestion 4 I paid $5 a ticket for 4 (non-refundable) tickets to a show that I can't use and can't resell, so l'm going to give them to my friends. I have two friends whose Marginal Willingness to Pay (MWTP) for the tickets are in the table below. I want to be fair to my friends, so I give them two tickets each. What is the change in surplus if I allocated them efficiently instead? Do not include the $ sign and remember to include a negative sign if you want to say that surplus has decreased. A's B's MWTPMWTP 1 $103 $65 2 $35 3 $31 $55 $43 4 $26 $38arrow_forward
- Consumer surplus is a measure of the difference between: a) The price which a consumer has to pay and the cost of producing the good (in a diagram, the area between the market price, and the supply curve). b) The consumer’s willingness to pay, and the cost of production (the area between the demand curve and the supply curve). c) The value which a consumer places on a unit of the good, and the market price (the area between the demand curve and the market price line). d) The marginal revenue from sales and the marginal cost of sales (the area between the marginal revenue and the marginal cost curves).arrow_forwardSuppose that Ty, George, Joe, and Ted are potential buyers of a rare Honus Wagner baseball card. Each will buy either one card or zero cards. Ty's benefit from owning the card is $500,000; George's benefit is $400,000; Joe's benefit is $300,000; and Ted's benefit is $200,000. What is total consumer surplus if the price of a Honus Wagner card is $250,000? $450,000 $350,000 $250,000 $150,000arrow_forwardMatthew and Victoria are shopping for a new pair of running shoes. Victoria is willing to pay $200 and Matthew is willing to pay $110 for a new pair of shoes. What is the total gain in surplus when the price of then shoes decreases from $160 to $100?arrow_forward
- There are six potential consumers of computer games, each willing to buy only one game. Consumer 1 is willing to pay $40 for a computer game, consumer 2 is willing to pay $35, consumer 3 is willing to pay $30, consumer 4 is willing to pay $25, consumer 5 is willing to pay $20, and consumer 6 is willing to pay $15. Suppose the market price is $29. What is the total consumer surplus? The market price decreases to $19. What is the total consumer surplus now? When the price falls from $29 to $19, how much does each consumer’s individual consumer surplus change? How does total consumer surplus change?arrow_forwardSuppose a consumer is willing to buy a book for $50, but the actual price of the book in the market is $30. What is the consumer surplus in this case? If the price of the book increases to $40, what would be the new consumer surplus?arrow_forwardOnce the buyer and seller agree on a price and exchange the product, a total surplus is "realized" as the "gains from trade." True or false?arrow_forward
- which statements are true Suppose favorable weather provides increases apple production. As a result, consumer surplus in the market for orange juice decreases because the supply curve of apple juice shifted to the The particular price that results in quantity supplied being equal to quantity demanded is the best price for consumers because it maximizes consumer surplus. The willingness to pay is the maximum amount that a buyer will pay for a good. Dora visits a clothing store to buy new dress suit. She is willing to pay $100 for the suit, but buys one on sale for $75. Dora's consumer surplus from the purchase is $75. If production technology improves in the shoe industry, consumer surplus for shoe buyers will increase because the rightward shift of supply caused the price to fall. Suppose that the equilibrium price in the market for heating oil is $3.50 per gallon. If a law imposed a price ceiling on the market and reduced the maximum legal price for heating oil to $3.00 per gallon…arrow_forwardThe formula consumer surplus uses a consumers "willingness to pay" as part of the equation. Economists uses "willingness to pay" as a stand in for the numerical value of the benefit a consumer receives from purchasing something. If a consumer's "willingness to pay" for a sandwich is $10, what does that mean? Why do economists say that the benefit of that sandwich (to that consumer) is $10?arrow_forward3. Consumer surplus for a group of consumers The following graph shows the demand curve for a group of consumers in the U.S. market (blue line) for laptops. The market price of a laptop is shown by the black horizontal line at $150. Each rectangle you can place on the following graph corresponds to a particular buyer in this market: orange (square symbols) for Edison, green (triangie symbols) for Hilary, purple (diamond symbols) for Kevin, tan (dash symbols) for Maria, and blue (circle symbols) for Rajiv. Use the rectangles to shade the areas representing consumer surplus for each person who is willing and able to purchase a laptop at a market price of $150. (Note: If a person will not purchase a laptop at the market price, indicate this by leaving his or her rectangle in its original position on the palette.) 400 Ed san Edison Hlary 300 250 Hilary Kain 200 Market Price Kevin 150 Mara 100 Maria 50 Rajv Rajv QUANTITY (Lastopa) Based on the information on the previous graph, you can tell…arrow_forward
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