Fred's demand schedule for movie DVDs is as follows: At $30, he would buy 1; at $25, he would buy two; at $15, he would buy 3; and at $10, he would buy 4.If the price of movie DVDs equals $25, the consumer surplus Fred receives from purchasing movie DVDs would be:
A)zero.
B)$5.
C)$25.
D)$55.
E)$70.

Question

Quizplus · Accepted Answer

To calculate consumer surplus, we need to find the difference between the maximum price a consumer is willing to pay and the actual price they pay.

At a price of $25, Fred would buy 2 DVDs. However, his maximum price for the first DVD is $30 and his maximum price for the second DVD is $25, so his total maximum willingness to pay is $55.

The actual amount he pays is $25 x 2 = $50.

Therefore, his consumer surplus is $55 - $50 = $5.

So, the best choice is B.

Fred's Demand Schedule for Movie DVDs Is as Follows: at $30