Question

Fitness is a magazine for women about health and exercise. Fitness offers year subscriptions for $12 on their website. Jess, Ania, Mandy, and Chloe exercise together and each enjoy reading Fitness. Jess is willing to pay $10, Ania is willing to pay $16, Mandy is willing to pay $24, and Chloe is willing to pay $12 for a subscription to the magazine. What is the value of market consumer surplus

Answer 1

Answer:

A) $16

Explanation:

According to a different source, these are the options that come with this question:

A) $16

B) $52

C) $40

D) $12

Consumer surplus refers to a measure of welfare in which we look at the ways in which people benefit from the goods and services that they are consuming. The market consumer surplus is the difference between the amount that consumers are willing to pay and the total amount that they actually do pay in the real world (this is known as the market price).

Answer 2

Answer:

$16

Explanation:

Consumer surplus can be defined as the difference between the reservation price of a consumer for a commodity and the price he actually paid to the commodity. Reservation price is the consumer is willing to pay.

Market consumer surplus is the summation of consumer surpluses of all the consumers of a commodity.

Given the information in the question, the consumer surplus and market consumer surplus can be calculated as follows:

Jess’ consumer surplus = 0. This is because Jess will not subscribe because her reservation price $10 is less than the offer price of $12. Therefore, Jess’ consumer surplus for the magazine is zero.

Ania’s consumer surplus = $16 - $12 = $4

Mandy’s consumer surplus = $24 - $12 = $12

Chloe’s consumer surplus = $12 - $12 = $0

Market consumer surplus = $0 + $4 + $12 + $0 = $16

Therefore, the value of market consumer surplus is $16.