Consider the following customers of a Japanese sushi restaurant. Their total benefit (TB) measured in terms of the maximum amount of money they are willing to pay for n dishes are given below. Dish of sushi 0 1 2 3 4567 8 Customer A 0 60 90 115 125 120 110 Total Benefit ($) 95 70 Customer B 0 30 50 60 55 50 40 25 5 As postulated in economics, customers are maximizing their economic surpluses. One can decide not to dine in this Japanese restaurant and can get zero economic surplus. (a) The sushi restaurant is now charging customers $20 per dish. How many dishes do these two customers choose to buy under this pricing arrangement respectively? Use both total and marginal approach to solve the problem. Show your steps. (b) Now, the sushi restaurant changes its pricing policy. Now they charge each customer $100 and let them order as many as they want. Will the customers continue to dine in this restaurant? If so, how many dishes would they choose to buy? Again, solve this using both the total approach and the marginal approach. Show your calculations. (Note: 1. The original $20 per dish offer is no longer available. 2. For the marginal approach, one should also check the condition that whether the implied quantity would give one a higher surplus than that of not dining in this restaurant.)
Consider the following customers of a Japanese sushi restaurant. Their total benefit (TB) measured in terms of the maximum amount of money they are willing to pay for n dishes are given below. Dish of sushi 0 1 2 3 4567 8 Customer A 0 60 90 115 125 120 110 Total Benefit ($) 95 70 Customer B 0 30 50 60 55 50 40 25 5 As postulated in economics, customers are maximizing their economic surpluses. One can decide not to dine in this Japanese restaurant and can get zero economic surplus. (a) The sushi restaurant is now charging customers $20 per dish. How many dishes do these two customers choose to buy under this pricing arrangement respectively? Use both total and marginal approach to solve the problem. Show your steps. (b) Now, the sushi restaurant changes its pricing policy. Now they charge each customer $100 and let them order as many as they want. Will the customers continue to dine in this restaurant? If so, how many dishes would they choose to buy? Again, solve this using both the total approach and the marginal approach. Show your calculations. (Note: 1. The original $20 per dish offer is no longer available. 2. For the marginal approach, one should also check the condition that whether the implied quantity would give one a higher surplus than that of not dining in this restaurant.)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:1.2
Consider the following customers of a Japanese sushi restaurant. Their total benefit (TB)
measured in terms of the maximum amount of money they are willing to pay for n dishes are
given below.
Dish of sushi
0
1
2
3
4
5
6
7
8
Customer A
0
60
90
Total Benefit ($)
115
125
120
110
95
70
Customer B
0
30
50
60
55
50
40
25
5
As postulated in economics, customers are maximizing their economic surpluses. One can
decide not to dine in this Japanese restaurant and can get zero economic surplus.
(a) The sushi restaurant is now charging customers $20 per dish. How many dishes do
these two customers choose to buy under this pricing arrangement respectively? Use
both total and marginal approach to solve the problem. Show your steps.
(b) Now, the sushi restaurant changes its pricing policy. Now they charge each customer
$100 and let them order as many as they want. Will the customers continue to dine in
this restaurant? If so, how many dishes would they choose to buy? Again, solve this
using both the total approach and the marginal approach. Show your calculations.
(Note: 1. The original $20 per dish offer is no longer available. 2. For the marginal
approach, one should also check the condition that whether the implied quantity would
give one a higher surplus than that of not dining in this restaurant.)
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