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

Identification problem associated, Note and explain the identification prob...

Note and explain the identification problem associated with the following statement. "During Bill Clinton's presidency the US economy saw unusually strong economic growth; thus, Mr

Ricardian model, a) There is a general trade, and sometimes prominent as in...

a) There is a general trade, and sometimes prominent as in case of UK, Canada, and Europe. When the tariff rates are showing an upward trend, the trade/GDP ratio is either declinin

Index number, definition and charactoristics of index numbers.problems whil...

definition and charactoristics of index numbers.problems while constructing index numbers

Business cycletories, list of all theories of business cycle theories

list of all theories of business cycle theories

Good to peanut butter, Bread is a related good to peanut butter: show on th...

Bread is a related good to peanut butter: show on the graph of the market for peanut butter, the impact on the price and quantity from an increase in the price of bread.

Mathematical presentation of indifference curve, Mathematical Presentation:...

Mathematical Presentation: Consider the utility function U = U(x 1 , x 2 ). Differentiating totally, we get the following: dU = U 1 dx 1 + U 2 dx 2 = 0 (as along the indiffe

What is GDP?, What was Real GDP for 2009? What does GDP tell us? How did ...

What was Real GDP for 2009? What does GDP tell us? How did GDP change from 2008? What caused these changes? What was GNP for 2009? What is the difference between GDP and GNP?

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