Economics EXERCISE 8.3 MAXIMIZING THE SURPLUS
Consider a market for the tickets to a football match. Six supporters of the Blue team would like to buy tickets; their valuations of a ticket (their WTPwillingness to pay (WTP) An indicator of how much a person values a good, measured by the maximum amount he or she would pay to acquire a unit of the good. See also: willingness to accept.closewillingness to pay (WTP) An indicator of how much a person values a good, measured by the maximum amount he or she would pay to acquire a unit of the good. See also: willingness to accept.close) are 8, 7, 6, 5, 4, and 3. The diagram below shows the demand ‘curve’. Six supporters of the Red team already have tickets, for which their reservation prices (WTAwillingness to accept (WTA) The reservation price of a potential seller, who will be willing to sell a unit only for a price at least this high. See also: willingness to pay.closewillingness to accept (WTA) The reservation price of a potential seller, who will be willing to sell a unit only for a price at least this high. See also: willingness to pay.close) are 2, 3, 4, 5, 6, and 7.
Draw the supply and demand ‘curves’ on a single diagram (Hint: the supply curve is also a step function, like the demand curve). Suppose all trades are to take place at a single price as in a competitive market where buyers and sellers are price takers.
Show that four trades take place in equilibrium.
What is the equilibrium price?
4. Calculate the consumer (buyer) surplus by adding up the surpluses of the four buyers who trade.
. Similarly calculate the producer (or seller) surplus.
6. Hence, find the total surplus in equilibrium.
7. Now suppose that the market operates through bargaining between individual buyers and sellers. Find a way of matching the buyers and sellers so that more than four trades occur. (Hint: suppose the highest WTP buyer buys from the highest WTA seller.)
8. In this case, work out the surplus from each trade.
9.How does the total surplus in this case compare with the equilibrium surplus?
10.Starting from the allocation of tickets you obtained through bargaining, in which at least five tickets are owned by Blue supporters, is there a way through further trade to make one of the supporters better off without making anyone worse off?
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please answer these. Thank you. 29. When a tax is placed on the buyers of coffee,...
please answer these. Thank you.
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1. 2. 3. 4. 5. 6. Submit when finished answering the R button. Due to this being a web course, only scores will...
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Submit when finished answering the R button. Due to this being a web course, only scores will be shown, there will be back Question 1 1 pts Willingness to pay measures the value that a buyer places on a good. O is the amount a seller actually receives for a good minus the minimum amount the seller is willing to accept. is the maximum amount a buyer is willing to pay minus the minimum...
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How do I calculate price at equilibrium, quantity at
equilibrium, and consumer surplus at equilibrium? Three questions
essentially, please help! Thank you!
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Figure 14-8 Suppose a firm operating in a competitive market has the following cost curves: 1. Refer to Figure 14-8...
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I need help with these Mcq's please. Thank you
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please answer these. Thank you.
29. When a tax is placed on the buyers of coffee, the buyers bear the entire burden of the tax b. sellers bear the entire burden of the tax burden of the tax will be always be equally divided between the buyers and the sellers d. burden of the tax will be shared by the buyers and the sellers, but the division of the burden is not always equal 30. the government wants to reduce...
QUESTION 1 Consumer surplus is the a. value of a good to a consumer. b. amount a consumer pays minus the amount the consumer is willing to pay. C. amount of a good consumers get without paying anything. d. amount a consumer is willing to pay minus the amount the consumer actually pays. QUESTION 2 Consumer surplus a. measures the benefit buyers receive from participating in a market b. measures the benefit sellers receive from participating in a market. c....
1.
2.
3.
4.
5.
6.
Submit when finished answering the R button. Due to this being a web course, only scores will be shown, there will be back Question 1 1 pts Willingness to pay measures the value that a buyer places on a good. O is the amount a seller actually receives for a good minus the minimum amount the seller is willing to accept. is the maximum amount a buyer is willing to pay minus the minimum...
How do I calculate price at equilibrium, quantity at
equilibrium, and consumer surplus at equilibrium? Three questions
essentially, please help! Thank you!
Participating in the market for a product are 12 consumers, each of whom will buy at most one unit of the good, and 11 suppliers, each of whom will sell at most one unit of the good. The distribution of buyer values is as follows: Buyer Value $1 Number of Buyers $3 4 $5 $9 3 The distribution...
Figure 14-8 Suppose a firm operating in a competitive market has the following cost curves: 1. Refer to Figure 14-8. Which line segment best reflects the short run supply curve for this firm? a. ABCF b. CD c. DF d. BCD 24. Efficiency in a market is achieved when a. the sum of producer surplus and consumer surplus is maximized. b. a social planner intervenes and sets the quantity of output after evaluating buyers' willingness to pay and sellers' costs....
I need help with these Mcq's please. Thank you
37. Efficiency in a market is achieved when cial planner intervenes and sets the quantity of output after evaluating buyers willingness to pay and sellers' costs the sum of producer surplus and consumer surplus is maximized all firms are producing the end at the same low cost per unit. no buyer is willing to pay more than the equilibrium price for any unit of the good. C ( 38. Total surplus...
The only four consumers in a market have the following willingness to pay for a goou: Buyer Willingness to Pay Carlos $15 bulana S25 Wilbur $35 Ming-la $45 a. If the market price for the good is $20, who will purchase the good? b. If there is only one unit of the good and if the buyers bid against each other for the right to purchase it, how much will the good will sell for and who will likely buy...
Suppose the supply of a good is given by the equation Q 800P 2,400, and the demand for the good is given by the equation 2,000-200P , where quantity (Q) is measured in millions of units and price (P) is measured in dollars per unit. The government decides to levy an excise tax of $2.00 per unit on the good, to be paid by the seller. Calculate the value of each of the following, before the tax and after the...
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