Find out the total economic surplus, Macroeconomics

The manager of the world famous Koala Caves offers a tour each afternoon starting at 3pm. The caves can be shown to only four people per day without undermining their ecology. Occasionally however, more than four people want to see the caves on the same day. The following table lists the people who wanted to see the caves on September 12, 2010, together with their respective times of arrival and the maximum price they each would be willing to pay for taking the tour that day.

                              Arrival time

      Maximum price ($)

Herbert

2:48

20

John

2:50

14

Kate

2:53

30

Jack

2:56

15

Penelope

2:57

40

Francis

2:59

12

Faith

3:00

17

       

a. If there is no charge for the tour and the manager operates it on a first come, first served basis, what will the total consumer surplus be for the four people who get to go on the tour that day?

b. Suppose the manager asks for volunteers to postpone their tour by offering increasing amounts of cash compensation until only four people want to see the caves that day. If he gives each volunteer the same compensation payment, how much money will he have to offer each volunteer to get the required number of volunteers? What is the total economic surplus under this policy?

c. Why is the compensation policy more efficient than the first come first served policy?

d. Describe a way of financing the manager's compensation payments that will make everyone, including the manager, either better off or no worse off than under the first come, first served approach. (Hint: Imagine that the manager tells the visitors that he will stick with first come, first served unless they agree to contribute to the compensation pool as he requests.) 

Posted Date: 2/27/2013 7:39:23 AM | Location : United States







Related Discussions:- Find out the total economic surplus, Assignment Help, Ask Question on Find out the total economic surplus, Get Answer, Expert's Help, Find out the total economic surplus Discussions

Write discussion on Find out the total economic surplus
Your posts are moderated
Related Questions
Consider the following model of an economy that begins in a macro equilibrium,

The U.K. produces and imports eggs. Suppose that the government imposed a quota on imports: Foreign suppliers could export no more than Q eggs (regardless of price). What effect do

equilibrium in money market and derivation of lm curve

Wholesale Prices, Consumer Prices and Inflation   From the man on the street to the highest policy makers, the behavior of prices is of intimate concern. Prices determine the pu

Provide an example of a decision in which you faced trade-offs, considered opportunity costs and evaluated the options by comparing the marginal benefits and the marginal costs ass

A study by the Information Technology department at WPU revealed company employees receive an average of four e-mails per hour. Assume the arrival of these e-mails is approximated

#questionAssume that an economy''s GDP Y=5000. Also assume that the government runs a deficit where tax revenue T=1000 and government expendituresG= 1500. The consumption function

During the 1990s, technological advance reduced the cost of computer chips. Explain, with the use of supply and demand diagrams, how the following markets are affected in terms of

What causes a supply curve to shift? a. Changes into Input Prices An input is a good which is used to generate another good. b. Changes into Technology c. Chang

A sample of 60 mutual funds was taken and the mean return in the sample was 13% with a standard deviation of 6.9%. The return on a particular index of stocks (against which the mut