Mr. Noriega paid $700 for each of three suits. Since all of the suits were pleasing to his taste, he would have been willing to pay according to this schedule: $950 for the first suit, $800 for the second suit, and $700 for the third suit. How much was his consumer surplus? a. $100. b. $150. c. $350. d. $250.

Question

Riley Hutchinson

Business

28 August, 23:54

Mr. Noriega paid $700 for each of three suits. Since all of the suits were pleasing to his taste, he would have been willing to pay according to this schedule: $950 for the first suit, $800 for the second suit, and $700 for the third suit. How much was his consumer surplus? a. $100. b. $150. c. $350. d. $250.

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Answers (1)

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Devyn Garza · Answer 1

C. $350

Explanation:

When a consumer is willing to pay more compared to the product's original price, it is called consumer surplus. In this case, Mr. Noriega paid $700 for each shirt. Because of changing tastes, he would be able to give more prices for each of the shirts. Therefore, it created a consumer surplus. Total consumer surplus for buying three shirts -

1. $950 - $700 = $250 From 1st shirt.

2. $800 - $700 = $100 From 2nd shirt.

3. $700 - $700 = $0 From 3rd shirt.

Therefore, total consumer surplus = $250 + $100 = $350

Hence, option C is the answer.