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7 February, 11:12

Mister Jones was selling his house. The asking price was $220,000, and Jones decided he would take no less than $200,000. After some negotiation, Mister Smith purchased the house for $205,000. Smith's consumer surplus is A. $20,000. B. $15,000. C. $5,000. D. not able to be calculated from the information given.

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  1. 7 February, 15:06
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    The correct answer is D. not able to be calculated from the information given.

    Explanation:

    The consumer surplus is the gap between the maximum price that the consumer is willing to pay and the price the consumer actually pay.

    So, in this case, to get consumer surplus, we have to know the price that Mister Smith was willing to pay and the price he actually paid. We only have the price he paid and we don't know how much he was willing to pay.

    Then, we are not able to calculate consumer surplus with the information given.
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