Look at the two tables above. What is the total surplus if Bob buys a unit from

Question

Look at the two tables above. What is the total surplus if Bob buys a unit from Carlos? If Barb buys a unit from Courtney? If Bob buys a unit from Chad? If you match up pairs of buyers and sellers so as to maximize the total surplus of all transactions, what is the largest total surplus that can be achieved?

a. What is the total surplus if Bob buys a unit from Carlos?

b. What is the total surplus if Barb buys a unit from Courtney?

c. What is the total surplus if Bob buys a unit from Chad?

d. If you match up pairs of buyers and sellers so as to maximize the total surplus of all transactions, what is the largest total surplus that can be achieved?

  

Minimum Acceptable Price Maximum Price Willing to Pay $15 12 Person Person $3 Bob Barb Bill Bart Brent Carlos Courtney Chuck Cindy Craig Chad

Explanation / Answer

a.

Surplus = (maximum price of B) – (Minimum price of C)

            = $15 - $3

            = $12 (Answer)

b.

Surplus = (maximum price of Ba) – (Minimum price of Co)

            = $12 - $4

            = $8 (Answer)

c.

Surplus = (maximum price of B) – (Minimum price of Ch)

            = $15 - $8

            = $7 (Answer)

d.

The largest total surplus is in between B and C, because it gives the highest surplus $12.

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