Table 7-3
The only four consumers in a market have the following willingness to pay for a good:
-Refer to Table 7-3. If the price is $20, then consumer surplus in the market is
A)$20, and Wilbur and Ming-la purchase the good.
B)$45, and Carlos and Quilana purchase the good.
C)$45, and Quilana, Wilbur, and Ming-la purchase the good.
D)$55, and Carlos, Wilbur, and Ming-la purchase the good.

Question

Table 7-3
The only four consumers in a market have the following willingness to pay for a good: 
-Refer to Table 7-3. If the price is $20, then consumer surplus in the market is
A)$20, and Wilbur and Ming-la purchase the good. 
B)$45, and Carlos and Quilana purchase the good. 
C)$45, and Quilana, Wilbur, and Ming-la purchase the good. 
D)$55, and Carlos, Wilbur, and Ming-la purchase the good.

Quizplus · Accepted Answer

To determine who will purchase the good at a price of $20, we add each individual's willingness to pay until the total equals $20 or less. This means Quilana, Wilbur, and Ming-la will purchase the good, leaving Carlos out. The consumer surplus for each individual is the difference between their willingness to pay and the price they actually pay. For Quilana, her consumer surplus is $25 - $20 = $5. For Wilbur, his consumer surplus is $20 - $20 = $0. For Ming-la, her consumer surplus is $15 - $20 = -$5. Since Ming-la has negative consumer surplus, we do not count her in the total consumer surplus for the market. Thus, the total consumer surplus in the market is $5 + $0 = $5 + $40 = $45, and the answer is C.

Table 7-3 The Only Four Consumers in a Market Have the Following