Question

Market price of TI-84 scientific calculator is $117. Matt values this calculator at $150 and Ann values this calculator at $100. What are Matt and Ann’s consumer surpluses equal to?

            a.         Matt’s consumer surplus is $33 and Ann’s consumer surplus is negative $17.

            b.         Matt’s consumer surplus is $33 and Ann’s consumer surplus is $0.

            c.         Matt’s consumer surplus is negative $17 and Ann’s consumer surplus is $0.

            d.         Matt’s consumer surplus is $150 and Ann’s consumer surplus is $100.

            e.         Matt’s consumer surplus is $0 and Ann’s consumer surplus is $0.

Answer 1

The correct answer is 'Option B'.

It is given that Matt values the calculator at $150 and Ann values the calculator at $100. The price of the calculator is $117. The consumer surplus is the difference between the amount at which the consumer values the product and the price actually paid by the consumer for the product. So, Matt's consumer surplus is $150 - $117 = $33 and Ann's consumer surplus is $0 because Ann will not purchase the product as its price is more than the consumer's willingness to pay for the product. Therefore, the correct answer is 'Option B'.

answered by: anonymous