Refer to Table 4-1. The table above lists the highest prices ...

[nramada]

Refer to Table 4-1. The table above lists the highest prices three consumers, Tom, Dick, and Harriet, are willing to pay for a short-sleeved polo shirt. If the price of the shirts falls from 28 to 20
 
  A) Harriet will receive more consumer surplus than Tom or Dick.
  B) Tom will buy two shirts; Dick and Harriet will each buy one shirt.
  C) consumer surplus increases from 14 to 35.
  D) consumer surplus will increase from 70 to 95.

Question 2

Often bar owners will require that patrons stand in a line to get a wristband entitling them to pay a preferred price for drinks if they arrive early to the bar.
 
  The wristbands are typically tamper- resistant and can be easily identified if patrons have been switching wristbands with other customers. What is the bar owner concerned about and why does he make his patrons wear these bands?

[b614102004]

Answer to Question 1

C

Answer to Question 2

The bar owner wants to increase business activity at a time when many customers may not be interested in showing up to the bar. This is typically in the early evening hours before sundown. Customers who may be sensitive to drink prices but indifferent as to when they patronize the bar may be willing to wait in the line to get the special hand bracelet. If the bracelets could be easily taken off then those who arrived early could charge a small price to those who arrived later so that they too could enjoy the lower price of bar drinks. The tamper-resistant nature of the wristbands keeps this transfer of producer surplus to the late-arriving customers from taking place.

[nramada]

Thank you

[b614102004]

No problemo