Jannah is a marketing consultant. Irene and Dalia are potential customers interested in commissioning Jannah to undertake a market survey and compile the findings in a report. Irene is willing to pay $500 for the service while Dalia is willing to pay $800. Suppose that the opportunity cost of Jannah's time is $1,200. Assume that Irene and Dalia do not know each other Which of the following statements is true?
A) Jannah should charge Irene $500 and Dalia $800; that way economic surplus is maximized.
B) Jannah should charge each customer $600; that way he will earn his opportunity cost and it will be fair to both Irene and Dalia.
C) Jannah should charge Irene $500 and Dalia no more than $700; that way he earns his opportunity cost and there is no loss in economic surplus.
D) Jannah should charge Iris $500 but charging Dalia $800 is unfair because it allows Jannah to earn more than his opportunity cost.

Question

Quizplus · Accepted Answer

Jannah maximizing economic surplus means charging each customer their maximum willingness to pay, which is $500 for Irene and $800 for Dalia, totaling $1300, exceeding the opportunity cost of $1200.

Jannah Is a Marketing Consultant