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

What are the advantages of capitalism, The benefits of capitalism are that ...

The benefits of capitalism are that the governments have limited control over other business, which lets business compete.

Descriptive statistics from the data, Table below shows the descriptive sta...

Table below shows the descriptive statistics which have been condensed from the data sheet for the period 1987 Q4 to 2011 Q3.   GDP (%) Real Exchan

Gross domestic product, In 1 to 2 sentences respond to the following commen...

In 1 to 2 sentences respond to the following comment. "Cleaning your own house is not counted in gross domestic product because it does not represent economic production."

AS/AD model, In an effort to provide tax relief for households while still ...

In an effort to provide tax relief for households while still balancing the budget, Congress votes to raise business taxes and decrease personal taxes. explain the impact of these

Differentiate between actual and potential output, Differentiate between Ac...

Differentiate between Actual and Potential output.  Actual output is that level which economy in fact produces. In contrast, potential output is the aggregate capacity output o

Quiz, To overcome the stagnant growth it was experiencing for the past 10-1...

To overcome the stagnant growth it was experiencing for the past 10-15 years, Japan undertook which of the following measures? Answer Undertook programs to build infrastructure

Economic luxury and an economic necessity, What is the difference between a...

What is the difference between an economic luxury and an economic necessity? Ans) An economic luxury is wasting land on pools huge garden, etc. An economic requirement is what y

Explain the labor market in the cross model, Q. Explain the labor market in...

Q. Explain the labor market in the cross model? In cross model, both P and W are exogenous andconstant. Hence real wage is constant and it is not essentially equal to the equil

Fdi inflows - an appraisal, FDI Inflows - An Appraisal: A comparison o...

FDI Inflows - An Appraisal: A comparison of the magnitude of FDI inflows received by India would appear too small, especially when compared to the inflows received by other co

Describe the economic justification for free trade policies, Some manufactu...

Some manufacturing and agricultural products produced in the Midwest are exported to overseas markets.  US consumers and businesses also purchase many products produced outside the

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