a). Suppose that the price of each ride is $5. At that price, how much consumer surplus does an individual consumer get? (Recall that the area of a right triangle is ½ the height of the triangle x the base of the triangle). b). Suppose that fun world consider charging and admission fee, even though it maintains the price of each ride at $5. What is the maximum admission fee it could charge? (Assume that all potential customers have enough money to pay the fee). c). Suppose that fun world lowered the price of each ride to zoo. How much consumer surplus does an individual consumer get? What is the maximum admission fee Fun World could charge? Concept Introduction: Consumer Surplus: It is defined as the difference between consumer’s willingness to pay and how much does a consumer pay for the goods and services. It is the area above the price level and below the demand curve. Producer Surplus : It is defined as the difference between the amount a producer of a good receives and the minimum amount the producer is willing to accept for the good. It is the area below the price level and above the supply curve.

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Chapter 4, Problem 8P

To determine

To Calculate:

a). Suppose that the price of each ride is $5. At that price, how much consumer surplus does an individual consumer get? (Recall that the area of a right triangle is ½ the height of the triangle x the base of the triangle).

b). Suppose that fun world consider charging and admission fee, even though it maintains the price of each ride at $5. What is the maximum admission fee it could charge? (Assume that all potential customers have enough money to pay the fee).

c). Suppose that fun world lowered the price of each ride to zoo. How much consumer surplus does an individual consumer get? What is the maximum admission fee Fun World could charge?

Concept Introduction:

Consumer Surplus:

It is defined as the difference between consumer’s willingness to pay and how much does a consumer pay for the goods and services. It is the area above the price level and below the demand curve.

Producer Surplus:

It is defined as the difference between the amount a producer of a good receives and the minimum amount the producer is willing to accept for the good. It is the area below the price level and above the supply curve.

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