Question

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https//cour Suppose Vicky just sat down to enjoy the Double Stack burger that she purchased for $1. Her friend, Cancy, wold also like a Double Stack burger, but he strongly dislkes standing In line. Clancy offers to buy Vicay's Double Stack rather than walt In line himself and pay $1. The table below shows some hypothetical offers Clancy might make surplus Vicky gets from buying the burger for $1, retusing Clancy's offer, and eating the burger, and enter i in the for Vicky's burger. First, compute the consumer table below. Next, compute and enter the consumer surplus she gets from buying the first burger at $1, selling it to Clancy at each price listed below, purchasing another burger for $1, and consuming it. Again, assume that Vicky's cost o waiting in line for a burger is zero. Purchasing and Purchasing, Selling, Purchasing $1.50 $2.00 $2.50 Notice that if Vicky is willing to sell her burger to Clancy while at the Wendy's restaurant, she would purchase another burger immediately, since the value of the burger ($2) remains higher than the price of the burger ($1) Assuming her cost of waiting in line is zero, what's the lowest of the offers listed in the table that she would accept in exchange for her burger? O $1.50 O $2.50 O $2.00 l et's relax t

Answer 1

Now, Vicky purchase the burger at price “$1”. Now, if she refuse to sell to Clancy and consume it, => the dollar value left is “$0”, => consumer surplus is “$1-$1 = $0”. So, it doesn’t matter how much Clancy want to pay if she refuse, => her consumer surplus is “$0”.

Now, if she sale it to her friend and further collect one and consume it, => her consumer surplus is the difference between what her friend want to pay and the dollar value of the burger. So, consider the following table shows her consumer surplus for different cases.

Now, if the same burger is available at Wendy’s restaurant at “$2” then Vicky should charge either less than or equal to “$2”, otherwise her friend refuse to buy from her. So, here she will charge “$2” from her friend, => the correct option is “$2”, => the 3^rd option.