Use the following to answer question:
-(Table: Lunch)Use Table: Lunch.This table shows market demand for picnic lunches for people taking all-day rafting trips on the river.Suppose that the marginal cost and average cost of each lunch are a constant $4 for all firms in the market.What is consumer surplus in this market in the long run?
A)$4
B)$10
C)$180
D)$360

Question

Use the following to answer question: 
-(Table: Lunch)Use Table: Lunch.This table shows market demand for picnic lunches for people taking all-day rafting trips on the river.Suppose that the marginal cost and average cost of each lunch are a constant $4 for all firms in the market.What is consumer surplus in this market in the long run?
A)$4 
B)$10 
C)$180 
D)$360

Quizplus · Accepted Answer

In the long run, the market price will be equal to the constant marginal and average cost of $4. At this price, the market quantity demanded is 45 lunches (see Table: Lunch). Consumer surplus is the area above the market price and below the demand curve, which is a triangle with base 45 and height $14 (the difference between the market price of $4 and the maximum willingness to pay of $18). Therefore, consumer surplus is (1/2) x 45 x $14 = $315. However, since each consumer only purchases one lunch, the actual consumer surplus per person is $315/45 = $7, which is closest to answer choice C ($180-$360 is too high, and $4 is too low).

Use the Following to Answer Question