Suppose Katie,Kendra,and Kristen each purchase a particular type of cell phone at a price of $80.Katie's willingness to pay was $100,Kendras's willingness to pay was $95,and Kristen's willingness to pay was $80.Which of the following statements is correct?
A)For the three individuals together, consumer surplus amounts to $35.
B)Having bought the cell phone, Kristen is better off than she would have been had she not bought it.
C)Had the price of the cell phone been $95 rather than $80, Katie and Kendra definitely would have been buyers and Kristen definitely would not have been a buyer.
D)The fact that all three individuals paid $80 for the same type of cell phone indicates that each one placed the same value on that cell phone.

Question

Quizplus · Accepted Answer

Consumer surplus is the difference between the price paid for a good and the willingness to pay for it. Katie's consumer surplus is $100 - $80 = $20, Kendra's consumer surplus is $95 - $80 = $15, and Kristen's consumer surplus is $80 - $80 = $0. Together, the total consumer surplus is $20 + $15 + $0 = $35.

Suppose Katie,Kendra,and Kristen Each Purchase a Particular Type of Cell