Amanda Mendez goes to a local café and orders a sandwich. Her willingness to pay for that sandwich is $10. The price of the sandwich is $4. The cost to the cafe to produce that sandwich is $1. How much economic surplus does Amanda receive when she purchases the sandwich?
A)$10
B)$6
C)$4
D)$3

Question

Quizplus · Accepted Answer

Amanda's consumer surplus is her willingness to pay minus the actual price she pays, which is $10 - $4 = $6. The economic surplus in this transaction is the difference between the total value (willingness to pay) and the cost of production, which is $10 - $1 = $9. However, the cafe captures $4 of this economic surplus as profit. Therefore, Amanda's individual surplus is $6 and the total economic surplus she receives is $6.

Amanda Mendez Goes to a Local Café and Orders a Sandwich