A market has four individuals,each considering buying a grill for his backyard.Assume that grills come in only one size and model.Abe considers himself a grill-master,and finds a grill a necessity,so he is willing to pay $400 for a grill.Butch is a meat-lover,honing his grilling skills,and is willing to pay $350 for a grill.Collin just met the girl of his dreams,and she loves a good grilled steak,so in his effort to impress her he is willing to pay $320 for a grill.Daniel loves grilled shrimp and thinks it might be cheaper in the long run if he buys a grill instead of eating out every time he wants grilled shrimp,so he is willing to pay $200 for a grill. Given the scenario described,if the market price of grills falls from $395 to $340,then we can say:
A) Abe's consumer surplus increases from $5 to $60, and total consumer surplus increases from $5 to $70.
B) Abe's consumer surplus decreases from $60 to $5, and total consumer surplus decreases from $70 to $5.
C) Collin's consumer surplus increases from $0 to $20, and total consumer surplus increases from $5 to $70.
D) Butch's consumer surplus decreases from $10 to $0, and total consumer surplus increases from $10 to $80.

Question

Quizplus · Accepted Answer

When the market price falls from $395 to $340, only Abe will still purchase the grill because his willingness to pay is above $340. He will now pay $340 for the grill which is $60 less than his willingness to pay of $400, thus increasing his consumer surplus from $5 to $60. The total consumer surplus of the market increases from $5 to $70 since only Abe buys the grill at the lower price. Therefore, the correct answer is A.

A Market Has Four Individuals,each Considering Buying a Grill for His