Suppose Katie,Kendra,and Kristen each purchase a particular type of cell phone at a price of $80.Katie's willingness to pay was $100,Kendra's willingness to pay was $95,and Kristen's willingness to pay was $80.Which of the following statements is correct?
A)For the three individuals together,consumer surplus amounts to $35.
B)Having bought the cell phone,Kristen is better off than she would have been had she not bought it.
C)Had the price of the cell phone been $95 rather than $80,Katie and Kendra definitely would have been buyers and Kristen definitely would not have been a buyer.
D)The fact that all three individuals paid $80 for the same type of cell phone indicates that each one placed the same value on that cell phone.

Question

Quizplus · Accepted Answer

Consumer surplus is the difference between what consumers are willing to pay and what they actually pay. Katie's surplus is $20 ($100 - $80), Kendra's is $15 ($95 - $80), and Kristen's is $0 ($80 - $80). Together, their consumer surplus is $35 ($20 + $15 + $0).

Suppose Katie,Kendra,and Kristen Each Purchase a Particular Type of Cell