-Refer to Exhibit 5-3 which shows the demand and supply of a college athlete.Suppose that NCAA rules limit the amount that the college can pay this athlete,such that their payment can not exceed the cost of attending the college (currently $8,000).The impact of this ruling would be a loss of income to the athlete of __________ and an equal gain in consumers' surplus to the college represented by ________________.
A) $2,000; area 2
B) $8,000; area 3
C) $10,000; area 2 + 3
D) $2,000; area 1 + 2

Question

-Refer to Exhibit 5-3 which shows the demand and supply of a college athlete.Suppose that NCAA rules limit the amount that the college can pay this athlete,such that their payment can not exceed the cost of attending the college (currently $8,000).The impact of this ruling would be a loss of income to the athlete of __________ and an equal gain in consumers' surplus to the college represented by ________________.
A) $2,000; area 2 
B) $8,000; area 3 
C) $10,000; area 2 + 3 
D) $2,000; area 1 + 2

Quizplus · Accepted Answer

The athlete loses $2,000 in income because the payment is capped at $8,000, while the market value might be $10,000. The college gains an equivalent amount in consumer surplus, represented by area 2.

-Refer to Exhibit 5-3 Which Shows the Demand and Supply