Exam 13: Consumers Surplus

Herbie's utility function is , where x is the number of x's he consumes per week and y is the number of y's he consumes per week. Herbie has $200 a week to spend. The price of x is $1. The price of y is currently $4 per unit. Herbie has received an invitation to join a club devoted to the consumption of y. If he joins the club, Herbie can get a discount on the purchase of y. If he belonged to the club, he could buy y for $1 a unit. How much is the most Herbie would be willing to pay to join this club?

Quasimodo from your workbook has the utility function , where x is his consumption of earplugs and m is money left over to spend on other stuff. If he has $10,000 to spend on earplugs and other stuff and if the price of earplugs rises from $50 to $70, then his net consumer's surplus

Yoram's utility function is U(x, y) = 2x + 5y. The price of x is $4 and the price of y is $15. Yoram has $150 a week to spend on x and y. Yoram is offered a chance to join a club of y consumers. If he joins, he can get y at a price of $10. What is the most that Yoram would be willing to pay to join the club?

Sam has quasilinear preferences and his demand function for x is . The price of x is initially $15 per unit and increases to $24 per unit. Sam's change in consumer's surplus is closest to

Producer's surplus at price p is the vertical distance between the supply curve and the demand curve at price p.

Sir Plus has a demand function for mead that is given by the equation D(p) = 100 - p. If the price of mead is $60, how much is Sir Plus's net consumer's surplus?

Pablo's utility function is , where x is the number of x's he consumes per week and y is the number of y's he consumes per week. Pablo has $200 a week to spend. The price of x is $1. The price of y is currently $5 per unit. Pablo has received an invitation to join a club devoted to the consumption of y. If he joins the club, Pablo can get a discount on the purchase of y. If he belonged to the club, he could buy y for $1 a unit. How much is the most Pablo would be willing to pay to join this club?

The number of "Gore in 2004" buttons demanded on a certain university campus is given by D(p) = 100 - p, where p is the price of buttons measured in pennies. The supply function is S(p) = p. The current administration manages to enforce a price ceiling of 40A2 per button. The effect on net consumer's surplus is

Lolita, the Holstein cow, has a utility function is , where x is her consumption of cow feed and y is her consumption of hay. If the price of cow feed is $.30, the price of hay is $1, and her income is $4, and if Lolita chooses the combination of hay and cow feed that she likes best from among those combinations she can afford, her utility will be

Consumer's surplus is another name for excess demand.

With quasilinear preferences, the equivalent variation and the compensating variation in income due to a tax are the same.

Izaak likes to eat pizza and to fish. The more fishing he does the happier he is, up to 8 hours a day. If he fishes longer than 8 hours he gets a sore back and is less happy than if he hadn't fished at all. For y less than or equal to 8, his utility function is U(x, y) = x + 6y, where x is money spent on pizza and y is hours per day spent fishing. His income is $45 a day and he has no expenses other than pizza. The Bureau of Fisheries has just decided to allow people without fishing licenses to fish only 3 hours a day. But if you buy a fishing license, you can fish as many hours as you wish. How much is Izaak willing pay for a license?

If Bernice (whose utility function is min{x, y}, where x is her consumption of earrings and y is money left for other stuff) had an income of $12 and was paying a price of $4 for a pair of earrings, then if the price of earrings went up to $6, the equivalent variation of the price change would be

If there is a price increase for a good that Marilyn consumes, her compensating variation is the change in her income that allows her to purchase her new optimal bundle at the original prices.

If there is Cobb-Douglas utility, compensating and equivalent variation are the same.

Poindexter's utility function is U(x, y) = min{x + 2y, 3x + y}, where x is butter and y is guns. If the price of butter is $4 and the price of guns is $5, what would it cost Poindexter to buy the cheapest bundle that he likes as well as 4 units of butter and 3 units of guns?

Bernice has the utility function u(x, y) = min{x, y}, where x is the number of pairs of earrings she buys per week and y is the number of dollars per week she has left to spend on other things. (We allow the possibility that she buys fractional numbers of pairs of earrings per week.) If she originally had an income of $18 per week and was paying a price of $6 per pair of earrings, then if the price of earrings rose to $10 per pair, the compensating variation of that price change (measured in dollars per week) would be closest to

Bernice has the utility function u(x, y) = min{x, y}, where x is the number of pairs of earrings she buys per week and y is the number of dollars per week she has left to spend on other things. (We allow the possibility that she buys fractional numbers of pairs of earrings per week.) If she originally had an income of $10 per week and was paying a price of $8 per pair of earrings, then if the price of earrings rose to $13 per pair, the compensating variation of that price change (measured in dollars per week) would be closest to

If somebody is buying 10 units of x and the price of x falls by $4, then that person's net consumer's surplus must increase by at least $40.

If Bernice (whose utility function is min{x, y}, where x is her consumption of earrings and y is money left for other stuff) had an income of $15 and was paying a price of $8 for a pair of earrings, then if the price of earrings went up to $13, the equivalent variation of the price change would be