Question
Asked Oct 31, 2019
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If Sam is willing to pay $50 for one good X, $30 for a second, $20 for a third, $8 for a fourth, and the market price is $10, then Sam’s consumer surplus is
a. $10.
b. $40.
c. $70.
d. $100.
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Expert Answer

Step 1

To determine the consumer surplus of person S.

Step 2

Consumer surplus is the difference between the amount that a consumer is willing to pay and the amount actually paid by the consumer.

Step 3

Person S is willing to pay $50 for first good but the market price is $10, so the consumer surplus for the first good equals $50 - $10 = $40.

Person S is willing to pay $30 for the second good when the market price is $10, so the consumer surplus for the second good is $30 - $10 = $20.

Person S is willing to pay $20 for t...

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Business

Economics

Consumer demand theory

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