Question

There are four consumers willing to pay the following amounts for haircuts,

Gloria :$7 Jay: $2 Claire : $8 Phil: $5


and there are four haircutting businesses with the following costs:

The maximum possible total surplus is $55. Each firm has the capacity to produce only one haircut. For efficiency, how many haircuts should be given? Which businesses should cut hair and which consumers should have their hair cut? How large is the maximum possible total surplus?

Answer 1

Following are the solution to the given question:

Step-by-step explanation:

Please find the attachment file.

When there are 3 haircuts, demand, and supply trends cross. The price may range from $5 to $4. It is because, at a cost of around $4, 3 hairstyles were required, 3 are requested, and 3 are also given. Similarly, unless the price is 5 dollars, 3 haircuts are required, and 3 were provided.

Gloria, Emily, and Phil get the hairstyles at this cost, whereas companies A, C, and D are in the market Maximum TS = shady area from the production of demand = 11