Question

onas is the only history tutor in his town. He has three potential customers. Xavier is willingto pay $70 for tutoring, Yasha is willing to pay $50 and Zander is willing to pay $25. SupposeJonas has to charge the same price to each of his customers, and each student he tutors costshim $15 (which mostly consists of the opportunity cost of his time). What price will Jonasset, and what will be the consumer surplus, producer surplus, and deadweight loss? AssumeJonas has no fixed costs to operate his tutoring bu

Answer 1

;

Answer:

a. $25

b. & c. $45, $25, $0

Explanation:

a. To charge the same price to each of his customers, Jonas will charge the least amount= $25 (offered by Zander)

b. Consumer surplus

I) For Xavier = $70 - $25 = $45

II) For Yasha = $50 - $25 = $25

III) For Zander = $25 - $25 = $0

c. Producer Surplus

I) For Xavier = $70 - $25 = $45

II) For Yasha = $50 - $25 = $25

III) For Zander = $25 - $25 = $0