Krugman / random MC problems:
1. Look at the table below that shows willingness to pay for a concert ticket to see Green Day at Red
Rocks stadium. If the ticket price is $30 per ticket, how many tickets will be sold and what is total
consumer surplus?
a. Five tickets sold; total consumer surplus $160
b. Three tickets sold; total consumer surplus $125
c. Three tickets sold; total consumer surplus $35
d. Three tickets sold; total consumer surplus $20
2. Use the same table for this question. Now assume that the ticket seller is able to charge $20 a
ticket for general admission and $50 per ticket for a reserved seat. All consumers would rather
have a reserved seat and any consumer willing to meet the price is given a reserve seat. The
number of tickets sold and the total consumer surplus is equal to:
a. Five tickets sold; total CS = $160
b. Four tickets sold; total CS = $150
c. Four tickets sold; total CS = $70
d. Four tickets sold; total CS = $40
3. If the cost of producing smartphones goes down, the price, equilibrium quantity and consumer surplus will most
likely change in which of the following ways?
Price
Quantity
Consumer surplus
a. Increase
Increase
Increase
b. Increase
Increase
Decrease
c. Increase
Decrease
Decrease
d. Decrease
Increase
Increase
e. Decrease
Decrease
Decrease
Krugman, Ch 4, problem 9: Fun World!
You are the manager of Fun World, a small amusement park. The accompanying diagram shows the demand curve of a
typical customer at Fun World.
a. Suppose that the price of each ride is $5. At that price, how
much consumer surplus does an individual consumer get? (Area of a
right triangle is 1⁄2bh)
b. Suppose that Fun World considers charging an admission fee,
even though it maintains the price of each ride at $5. What is the
maximum admission fee it could charge? (Assume that all potential
customers have enough money to pay.)
c. Suppose that Fun World lowered the price of each ride to
zero. How much consumer surplus does an individual consumer get?
What is the maximum admission fee Fun World could charge?
More Fun World!
The accompanying diagram shows the supply and demand graph of the market for bottled water at Fun World. Demand
1 shows initial demand for bottled water in the morning. Demand 2 shows how demand increased after temperatures
increased at Fun World.
Demand 2
Demand 1
a.
b.
c.
d.
e.
What is the initial equilibrium price and quantity of bottled water at Fun World?
Calculate consumer, producer and total surplus at Fun World in the morning (using Demand 1).
After demand increases, what is the new equilibrium price and quantity?
Calculate consumer, producer, and total surplus in the afternoon (using Demand 2).
Who gains (in terms of surplus) when this increase in demand occurs in the market? Do you think it would
matter if we drew the curves with steeper slopes?