A ticket broker purchases two tickets to an upcoming concert for $30 each, although the original ticket holder would have been willing to sell each ticket for $10. The ticket broker later sells the tickets to a new buyer for $50 each. If the new buyer would have been willing to pay up to $90 for each ticket, what fraction of the total value created is captured by the broker? 2/9 1/4 5/9 5/8

Question

Business

Arely

26 August, 04:09

A ticket broker purchases two tickets to an upcoming concert for $30 each, although the original ticket holder would have been willing to sell each ticket for $10. The ticket broker later sells the tickets to a new buyer for $50 each. If the new buyer would have been willing to pay up to $90 for each ticket, what fraction of the total value created is captured by the broker? 2/9 1/4 5/9 5/8

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Answers (1)

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Hamza · Answer 1

The correct answer is 1/4.

Explanation:

The value captured in the market is defined as the surplus earned in the economy. It is computed by subtracting the price of a product from the consumer's willingness to pay. Value captured in the market can be in the form of producer surplus or consumer surplus.

From the question we can deduce that total value captured in the market is $80. As the price of tickets is $10, consumers are willing to pay $90 for them. The value captured by the broker is $ (50 - 30) = $20. This is because the broker bought the tickets for $30 each and sold them for $50 each.

The fraction of value captured by the broker = value captured by broker / total value captured in the market

= 20 / 80

= 1/4