Figure 10-3

Bettye Babylon does not charge admission to her arboreal estate, the Hanging Gardens. Due to space limitations, Bettye only allows 200 visitors per day at her estate. The figure represents the supply and demand for admission to the Hanging Gardens.
-Refer to Figure 10-3.At a ticket price of $0, the marginal benefit from the 200th ticket is

Question

Figure 10-3
  
Bettye Babylon does not charge admission to her arboreal estate, the Hanging Gardens. Due to space limitations, Bettye only allows 200 visitors per day at her estate. The figure represents the supply and demand for admission to the Hanging Gardens.
-Refer to Figure 10-3.At a ticket price of $0, the marginal benefit from the 200th ticket is

Quizplus · Accepted Answer

At a price of $0, the demand curve intersects the supply curve at a quantity of 200 tickets. The marginal benefit from the 200th ticket is given by the height of the demand curve at that point, which is above the price. Therefore, the best choice is to charge a positive price to maximize the total welfare (consumer surplus plus producer surplus) from admission to the Hanging Gardens.

Figure 10-3 Bettye Babylon Does Not Charge Admission to Her Arboreal Estate