Principles of Economics, 7th Edition

Published by South-Western College
ISBN 10: 128516587X
ISBN 13: 978-1-28516-587-5

Chapter 7 - Part III - Consumers, Producers, and the Efficiency of Markets - Quick Check Multiple Choice - Page 151: 1

Answer

a) Consumer surplus is \$20 larger than producer surplus

Work Step by Step

Value of time as per Jen = \$60 per hour Value of massage as per Colleen = \$300 per hour Negotiated price per massage of 2 hours = \$200 Consumer surplus = \$300 - \$200 = \$100 Producer surplus = \$200 - 2*\$60 = \$200 - \$120 = \$80
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