Table 8-3
Julie plans to start a pet-sitting service. She surveyed her neighbourhood to determine the demand for this service. Assume that each person surveyed demands only one hour of pet sitting services per period. Table 8-3 above shows a portion of her survey results.
-Refer to Table 8-3.Suppose Julie's marginal cost of providing this service is constant at $7 and she charges each customer according to his or her willingness to pay instead of a uniform price of $7.Which of the following statements is true?

Question

Table 8-3
  Julie plans to start a pet-sitting service. She surveyed her neighbourhood to determine the demand for this service. Assume that each person surveyed demands only one hour of pet sitting services per period. Table 8-3 above shows a portion of her survey results.
-Refer to Table 8-3.Suppose Julie's marginal cost of providing this service is constant at $7 and she charges each customer according to his or her willingness to pay instead of a uniform price of $7.Which of the following statements is true?

Quizplus · Accepted Answer

If Julie charges each customer according to his or her willingness to pay, she can capture the consumer surplus as economic profit. This increases her profit, converting consumer surplus into producer surplus. Therefore, Option B is the correct answer. Option A is incorrect because we cannot conclude that the demand for her services is reduced from the information given. Option C is incorrect because while some customers might have an increased consumer surplus due to a lower price, others might pay more than the uniform price of $7. Option D is incorrect because producer surplus is not converted into consumer surplus in this case.

Table 8-3 Julie Plans to Start a Pet-Sitting Service. She