Question

Suppose that instead of paying per hour, a moving company offers a flat rate of $1,200 for movers plus a truck for an eight hour day. If you hired this moving company and used them for the entire eight hours, how much consumer surplus would you gain?

Answer 1

Answer:

the first part of the question is missing, so I looked for a similar one (see attached image):

the cost of hiring a moving crew for 8 hours = $250 per hour x 8 hours = $2,000

the competing company offered you a deal worth $1,200

since you expect to use the moving crew during the whole 8 hours, you will gain = $2,000 - $1,200 = $800 in consumer surplus

Consumer surplus is the difference between what a consumer (in this case you) are willing to pay for a good or service and the actual price of the good or service. Consumer should be willing to consumer a good or service as long as the consumer surplus is ≥ 0.