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

Trading nation is impacted, In a ___________ exchange rate system each trad...

In a ___________ exchange rate system each trading nation is impacted directly by the supply and demand for their currency. A) Fixed B) Dirty C) Floating D) Clean

How large is the money supply, Assume that the following data describe the ...

Assume that the following data describe the condition of the banking system: Total Reserves                         $200 billion Transactions Deposited          $700 billion

Traditional business cycle, casual factors of traditional business cycle an...

casual factors of traditional business cycle and its effects on the sectors of the economy

Important the industry effects, Firm effects are more important the industr...

Firm effects are more important the industry effects. What does this mean? Can you think of situations where this might not be true?

Telemarketer makes six phone calls, A telemarketer makes six phone calls pe...

A telemarketer makes six phone calls per hour and is able to make a sale on 30 percent of these contacts. During the next two hours, find: A) The probability of making exactly four

Current event opportunity, Give an example of a current event opportunity c...

Give an example of a current event opportunity cost that includes graphs

DEFLATION IN JAPAN, what happened to the equilibrium price level in Japan d...

what happened to the equilibrium price level in Japan during the early 2000s? How did Japan''s equilibrium price level adjust between the middle of 2008 and early 2010?

Public sector, Are there any current subsidy or welfare issues that are bei...

Are there any current subsidy or welfare issues that are being discussed or addressed in parliament or in municipalities

Determine the net terminal year cash flow, A company is assessing a propose...

A company is assessing a proposed 4-year project.  The depreciable cost will involve the following: $300,000 for the equipment, $20,000 for shipping, and $30,000 for installation.

Compute total demand and firms profit, Suppose three identical firms are e...

Suppose three identical firms are engaged in Cournot competition in quantities. They all have marginal costs equal to 40. Market demand is given by: P(X) = 200 - X = 200 - (x

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