Table 7-5
For each of three potential buyers of oranges, the table displays the willingness to pay for the first three oranges of the day. Assume Allison, Bob, and Charisse are the only three buyers of oranges, and only three oranges can be supplied per day.
-Refer to Table 7-5. Who experiences the largest gain in consumer surplus when the price of an orange decreases from $1.05 to $0.75?
A)Allison
B)Bob
C)Charisse
D)Allison and Bob experience the same gain in consumer surplus, and Charisse's gain is zero.

Question

Table 7-5
For each of three potential buyers of oranges, the table displays the willingness to pay for the first three oranges of the day. Assume Allison, Bob, and Charisse are the only three buyers of oranges, and only three oranges can be supplied per day. 
-Refer to Table 7-5. Who experiences the largest gain in consumer surplus when the price of an orange decreases from $1.05 to $0.75?
A)Allison 
B)Bob 
C)Charisse 
D)Allison and Bob experience the same gain in consumer surplus, and Charisse's gain is zero.

Quizplus · Accepted Answer

Allison experiences the largest gain in consumer surplus when the price of an orange decreases from $1.05 to $0.75 because her willingness to pay for the third orange is highest ($1.25), so she would be the first to exit the market if the price were higher than $0.75. Therefore, she would gain the most from the price decrease as she can now purchase an orange at a lower price than she was willing to pay for it. Bob's gain in consumer surplus is $0.30 ($1.00-$0.70), while Charisse's gain is $0.20 ($0.70-$0.50).

Table 7-5 For Each of Three Potential Buyers of Oranges, the Table