A market has four individuals, each considering buying a grill for his backyard. Assume that grills come in only one size and model. Abe considers himself a grill-master, and finds a grill a necessity, so he is willing to pay $400 for a grill. Butch is a meat-lover, honing his grilling skills, and is willing to pay $350 for a grill. Collin just met the girl of his dreams, and she loves a good grilled steak, so in his effort to impress her he is willing to pay $320 for a grill. Daniel loves grilled shrimp and thinks it might be cheaper in the long run if he buys a grill instead of eating out every time he wants grilled shrimp, so he is willing to pay $200 for a grill.
Given the scenario described, if the market price of grills falls from $395 to $340, then we can say:
A. Abe's consumer surplus increases from $5 to $60, and total consumer surplus increases from $5 to $70.
B. Abe's consumer surplus decreases from $60 to $5, and total consumer surplus decreases from $70 to $5.
C. Collin's consumer surplus increases from $0 to $20, and total consumer surplus increases from $5 to $70.
D. Butch's consumer surplus decreases from $10 to $0, and total consumer surplus increases from $10 to $80.
A. Abe's consumer surplus increases from $5 to $60, and total consumer surplus increases from $5 to $70.
You might also like to view...
If a country imposes a tariff on all imports, then you would expect to see:
a. an increase in this country's current account surplus. d. an increase in this country's foreign lending. c. in increase in this country's exchange rate. d. a and b. e. all of the above.
Trade restrictions result in all of the following except one. Which is the exception?
a. higher prices b. fewer choices c. improved quality d. misallocation of resources e. reduced competition
A good or service that is forgone by choosing one alternative over another is called a(n):
a. explicit cost. b. opportunity cost. c. historical cost. d. accounting cost.
As long as price is greater than average variable cost, a firm maximizes its profit by producing that quantity of output for which
a. average revenue equals average total cost b. the price is the highest c. marginal revenue equals marginal cost d. average total cost is minimized e. average variable cost is minimized