Question

Question 6)

There are four consumers willing to pay the following amounts for haircuts:

Gloria: $35 Jay: $10     Claire: $40 Phil: $25

There are four haircutting businesses with the following costs:

Firm A: $15         Firm B: $30        Firm C: $20        Firm D: $10

Each firm has the capacity to produce only one haircut. To achieve efficiency, how many haircuts should be

given? Which businesses should cut hair and which consumers should have their hair cut? How large is the

maximum possible total surplus? Answer should be in proper professional way for good feedback not be in handwritten plz.

Question 6)

There are four consumers willing to pay the following amounts for haircuts:

Gloria: $35 Jay: $10     Claire: $40 Phil: $25

There are four haircutting businesses with the following costs:

Firm A: $15         Firm B: $30        Firm C: $20        Firm D: $10

Each firm has the capacity to produce only one haircut. To achieve efficiency, how many haircuts should be

given? Which businesses should cut hair and which consumers should have their hair cut? How large is the

maximum possible total surplus?

Question 6) There are four consumers willing to pay the following amounts for haircuts: Gloria: $35 Jay: $10 Claire: $40 Phil: $25 There are four haircutting businesses with the following costs: Firm A: $15 Firm B: $30 Firm C: $20 Firm D: $10 Each firm has the capacity to produce only one haircut. To achieve efficiency, how many haircuts should be given? Which businesses should cut hair and which consumers should have their hair cut? How large is the maximum possible total surplus?

Answer 1

Given: Four consumers Gloria, Jay, Claire, phil demand hair cut at prices $35, $10, $40, $25 respectively. and there are four firms A, B, C, D which supply hair cut at the cost of $15, $30, $20, $10 respectively. each firm can produce only one hair cut.

Solution: To achive efficiency , the frims A, c, and D will cut the hair for Claire, Gloria, and Phil because their willing ness to pay is higher than the cost of the hair cut the respective firms assigning. The cosumer Jay will not get the hair cut since his willingness to pay is very lower than the cost that firm B imposes.

Maximum total surplus is the difference between the consumers willingness to pay and the cost of the consumer product. Therefore, maximum total surplus = ($35-$15) + ($40-$20) + ($25-$10)

Maximum Total Surplus = $55