Figure 7E

-Refer to Figure 7E. Assume that the function in the figure measures WTP for visits to a national park. If the actual cost per visit is set above C0, then it must be that consumer surplus
is…
A) Equal to producer surplus.
B) Greater than area B.
C) Equal to area A.
D) Equal to area B.
E) Smaller than area B.

Question

Figure 7E
 
-Refer to Figure 7E. Assume that the function in the figure measures WTP for visits to a national park. If the actual cost per visit is set above C0, then it must be that consumer surplus
 is…
A) Equal to producer surplus. 
B) Greater than area B. 
C) Equal to area A. 
D) Equal to area B. 
E) Smaller than area B.

Quizplus · Accepted Answer

If the actual cost per visit is set above C0, then the price that consumers are willing to pay (WTP) is lower than the actual cost. This means that consumer surplus will be smaller than area B, as consumers are not willing to pay as much as they would need to in order to obtain the same level of satisfaction as when the cost was at C0. Therefore, E is the best choice. Choices A, B, C, and D are all incorrect, as they either do not provide a correct statement or do not directly address the question.

Figure 7E -Refer to Figure 7E. Assume That the Function in the the Function