EBK PRINCIPLES OF MACROECONOMICS
6th Edition
ISBN: 9780073534701
Author: Frank
Publisher: YUZU
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Chapter 1, Problem 1.1CC
To determine
Estimate the value of economic surplus.
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Suppose the campus dining facility at Mines Market offers weekend meals for the Mines community. The following table shows your willingness to pay for each additional meal during a typical weekend.
Meal
Willingness to Pay
for this Meal
1
$12
2
8
3
6
4
4
5
2
6
0
There are two ways to purchase meals. You may either pay $10 for each meal or you may pay a fixed fee and eat as many meals as you like during the weekend. What is the most that you would be willing to pay for a meal plan that allows you to eat unlimited meals during a weekend at no cost for each meal?
How do I calculate this?
Suppose there are three types of consumers who attend concerts at your university's performing arts
center: students, staff, and faculty. Each of these groups has a different willingness to pay for tickets;
within each group, willingness to pay is identical. There is a fixed cost of $1,000 to put on a concert, but
there are essentially no variable costs.
For each concert:
•
.
There are 150 students willing to pay $20.
There are 220 staff members willing to pay $35.
There are 100 faculty members willing to pay $50.
a. If the performing arts center can charge only one price, what price should it charge?
b. What are profits at this price?
c. If the performing arts center can price-discriminate and charge two prices, one for students and another
for faculty/staff, what are its profits?
d. If the performing arts center can perfectly price-discriminate and charge students, staff, and
faculty three separate prices, what are its profits?
Chapter 1 Solutions
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