The following table describes the reservation prices and four bids for an auction of three tickets to the recent Madonna concert.
The total consumer surplus that results from this auction is:
A) $0.
B) $99.
C) $297.
D) $100.
E) none of the above.

Question

The following table describes the reservation prices and four bids for an auction of three tickets to the recent Madonna concert. 
The total consumer surplus that results from this auction is:
A) $0. 
B) $99. 
C) $297. 
D) $100. 
E) none of the above.

Quizplus · Accepted Answer

The consumer surplus is the difference between the total value the bidders place on the tickets (their reservation prices) and the amount they end up paying. The highest reservation price is $200 and the lowest successful bid is $101, so each bidder receives a consumer surplus of at least $99 ($200-$101). Therefore, the total consumer surplus would be $297 ($99 x 3).

The Following Table Describes the Reservation Prices and Four Bids