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.

Question

Want to see the full answer?

Answer 1

Question

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.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

Published in 1980, the book Free to Choose discusses how economists Milton Friedman and Rose Friedman proposed a one-sided view of the benefits of a voucher system. However, there are other economists who disagree about the potential effects of a voucher system.

The following diagram illustrates the demand and marginal revenue curves facing a monopoly in an industry with no economies or diseconomies of scale. In the short and long run, MC = ATC. a. Calculate the values of profit, consumer surplus, and deadweight loss, and illustrate these on the graph. b. Repeat the calculations in part a, but now assume the monopoly is able to practice perfect price discrimination.

The projects under the 'Build, Build, Build' program: how these projects improve connectivity and ease of doing business in the Philippines?