Consider the following scenario to answer the following questions: The Varsity,located in downtown Atlanta,is the world's largest drive-in restaurant.Located near the Georgia Tech campus,the drive-in attracts two distinct types of customers-college students and visitors to Atlanta.The owners are considering offering a student discount of $1 off their combo meal,which is regularly priced at $9.There are 5,000 students interested in purchasing a combo meal,with a maximum willingness to pay of $8.There are 5,000 visiting customers interested in purchasing the combo meal,with a maximum willingness to pay of $9.Assume that each customer,at most,will purchase a single meal and the marginal cost is $5.
-What is the amount of total consumer surplus if the Varsity offers the combo meal at the single price of $9 per meal?
A) $20,000
B) $15,000
C) $10,000
D) $5,000
E) $0

Question

Quizplus · Accepted Answer

If the combo meal is priced at $9, students with a maximum willingness to pay of $8 will not purchase it, resulting in no consumer surplus from them. Visitors, who are willing to pay $9, will purchase the meal but will have no consumer surplus since they pay exactly their maximum willingness to pay. Therefore, the total consumer surplus is $0.

Consider the Following Scenario to Answer the Following Questions: the Varsity,located