Suppose the equilibrium price of bicycle tires is $42, but the market price falls to $37. Jerry can still make a profit at this lower price, so they stay in business. Anat, who could make a small profit by selling tires at $42, goes out of business as the price falls. Madison bought tires at the higher price from Anat and is delighted to buy them at a lower price from Jerry. Marcus, who previously did not purchase tires, is now willing to pay the lower price, so they buy new tires from Jerry. Which individual's actions contribute to a reduction in consumer surplus?

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Suppose the equilibrium price of bicycle tires is $42,
but the market price falls to $37. Jerry can still make a
profit at this lower price, so they stay in business. Anat,
who could make a small profit by selling tires at $42,
goes out of business as the price falls. Madison bought
tires at the higher price from Anat and is delighted to
buy them at a lower price from Jerry. Marcus, who
previously did not purchase tires, is now willing to pay
the lower price, so they buy new tires from Jerry.
Which individual's actions contribute to a reduction in
consumer surplus?
Transcribed Image Text:Suppose the equilibrium price of bicycle tires is $42, but the market price falls to $37. Jerry can still make a profit at this lower price, so they stay in business. Anat, who could make a small profit by selling tires at $42, goes out of business as the price falls. Madison bought tires at the higher price from Anat and is delighted to buy them at a lower price from Jerry. Marcus, who previously did not purchase tires, is now willing to pay the lower price, so they buy new tires from Jerry. Which individual's actions contribute to a reduction in consumer surplus?
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