Suppose Katie, Kendra, and Kristen each purchase a particular type of cell phone

Question

Suppose Katie, Kendra, and Kristen each purchase a particular type of cell phone at a price of $80. Kate's willingness to pay was $100, Kendra's willingness to pay was $95, and Kristen's willingness to pay was $80. Which of the following statements is correct?

a. For the three individuals together, consumer surplus amounts to $35.

b. Having bought the cell phone, Kristen is better off than she would have been had she not bought it.

c. Had the price of the cell phone been $95 rather than $80, Katie and Kendra definitely would have been buyers and Kristen definitely would not have been a buyer.

d. The fact that all three individuals paid $80 for the same type of cell phone indicates that each one placed the same value on that cell phone.

a. For the three individuals together, consumer surplus amounts to $35.

b. Having bought the cell phone, Kristen is better off than she would have been had she not bought it.

c. Had the price of the cell phone been $95 rather than $80, Katie and Kendra definitely would have been buyers and Kristen definitely would not have been a buyer.

d. The fact that all three individuals paid $80 for the same type of cell phone indicates that each one placed the same value on that cell phone.

Explanation / Answer

Answer is (a) ..because kate's consumer surplus= $100-$80=$20. similarly, kendra's will be $95-$80=$15. And kristen's consumer surplus will be $80-$80=0 . So total consumer surplus is $20+$15=$35

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