Question

Assume that there are four consumers A, B, C, and D, and the prices that each of them is willing to pay for a glass of lemonade is, respectively, $1.50, $1.20, $1.00, and $0.90. If the actual price of lemonade is $1.00 per glass, then consumer surplus in this market will be $0.70.

Answer 1

Answer:

The consumer surplus in this market will be $0.70. This is false.

Step-by-step explanation:

There are four consumers A, B, C, and D.

The consumers are willing to pay for a glass of lemonade as $1.50, $1.20, $1.00, and $0.90 respectively.

The actual price of lemonade is $1.00 per glass. So, the consumer surplus in this market will be $+0.50+0.20+0-0.10$ = $0.60

Hence, the given condition is False.