Question

Adie wants to take some online classes this semester. She is willing to pay $1,000 for the first class, $800 for the second, $700 for the third, and $500 for the fourth. If online classes cost $750, Adie will take and her consumer surplus will equal A) two; $300 online classes, B) three; $350 C) four; $600 D) two; $400

Answer 1

The correct answer is:

two; $300 online classes

Step-by-step explanation:

First, let me define what consumer surplus is; consumer surplus is the difference between the amount a consumer is willing to pay for a good or service and the actual price of the good or service in the market. For surplus to be possible the willing amount must be more than the actual price of the goods or services.

Next, let us lay out the details of the classes and their prices

Willing amounts;

first class = $1,000

second class = $800

Third class = $700

Fourth class = $500

Actual price of each class = $750.

From the information above, we can see that Adie, had consumer surpluses in the first and second class because the price she was willing to pay for them were more than their actual prices, hence, she will take just two classes.

To calculate the total consumer surplus, we will subtract the actual price from the price she was willing to pay;

First class; Price she was willing to pay - actual price = 1,000 - 750 = $250

second class; 800 - 750 = $50

Therefore total consumer surplus = 250 + 50 = $300

Therefore Adie will take just two classes and her consumer surplus is $300 (A)