Find out the total economic surplus, Macroeconomics

Assignment Help:

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.) 


Related Discussions:- Find out the total economic surplus

Aggregate demand and aggregate supply, Find one or more articles in the wal...

Find one or more articles in the wall street Journal or other business publications that describe changes in fiscal or monetary policies in the United States. Discuss how these pol

Elucidate own small building company, You operate your own small building c...

You operate your own small building company and have decided to bid on a government contract to build a pedestrian walkway in a national park during the coming winter. The walkway

Demand for money - theories, The amount of wealth that households and busin...

The amount of wealth that households and business desire to hold in the form of money balances is called the 'demand for money'. Individuals and firms have at their command only

Equilibrium, If the marginal disutility of labor increases, the equilibrium...

If the marginal disutility of labor increases, the equilibrium real wage increases and the equilibrium quantity of labor goes up. True or false?

Functions of commercial bank - granting a loan, Granting a ...

Granting a loan: When commercial banks lend, they create money. This can be explained by extending the hypothetical example of Bank

Business cycle, Analyse the effect of contraction phase to the vunerable

Analyse the effect of contraction phase to the vunerable

MR AND MC, EXPLAIN THE MR AND MC APPROACH FOR EQUILIBRIUM DETERMINATION OF ...

EXPLAIN THE MR AND MC APPROACH FOR EQUILIBRIUM DETERMINATION OF FIRM IN SHORT RUN.

Growth, What is Bolivia''s growth in 1985?

What is Bolivia''s growth in 1985?

Franchise revoked is suing mercedes, In 1999 Mercedes-Benz USA adopted a ne...

In 1999 Mercedes-Benz USA adopted a new pricing policy, which it called NFP (negotiation-free process), that sought to eliminate price negotiations between customers and new-car de

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd