Multiple Choice
Use the graph for funky-fresh rhymes above. If price increases from \$3,000 to \$5,000 per funky-fresh rhyme, what is the change to consumer surplus?
5. Consumer and Producer Surplus; Price Ceilings and Price Floors
WIllingness to Pay and Consumer Surplus
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Kanye West is ready to create his next hit single. He knows that he is willing to pay up to \$3,000 for a funky fresh rhyme, and that he will need a total of ten funky fresh rhymes to create his hit single. After rounding up his best ghostwriters, he summarized the following schedule. If Kanye values all funky-fresh rhymes equally, what is his maximum consumer surplus?
A
\$6,000
B
\$12,000
C
\$24,000
D
\$30,000
Verified step by step guidance1
Identify the maximum price Kanye is willing to pay for each rhyme, which is \$3,000.
Determine the quantity of rhymes Kanye needs, which is 10 rhymes.
Calculate the total amount Kanye is willing to pay for 10 rhymes by multiplying the maximum price per rhyme (\$3,000) by the quantity of rhymes (10).
Calculate the total cost of purchasing 10 rhymes from the ghostwriters by selecting the cheapest options available. Start with the lowest price per rhyme and accumulate until reaching 10 rhymes.
Subtract the total cost of purchasing the rhymes from the total amount Kanye is willing to pay to find the consumer surplus.
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