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
A recent article estimated that the elasticity of the rate of gonorrhea with respect to the price of beer is about 0.8. If this estimate is correct, are unprotected sex and beer su



What is the difference between economic growth and economic development? Growth is only individual dimension of development. Economic development is a complicated multi-dimensio

What is Consumer Price Index CPI is a price index of a specific basket known as the CPI-basket. CPI-basket contains essentially all the service and goods consumed in a country

Determine the principle of equity The principle of equity is that a tax must be fair and the tax is levied on those with the ability to pay tax. The principle of efficiency

State about the unitesd state government bonds In most countries, you find government bonds with longer maturity. For example, in the United States you have Treasury notes (two

An antenna shown in Figure is to be adjusted from its current position to a new desired position by turning a potentiometer at an angle θ i (t) . The potentiometer converts the an

A sudden decrease in the growth rate of GDP will cause a change in: A. planned investment spending. B. unplanned investment spending. C. both planned and unplanned investment spend

What is green GDP and How it is evaluated ?