My friend Mark has a substantial appetite. An innovative new pizza made with prairie oysters piques his interest. He has never had such a pizza before. His demand for this new delicacy is such that he is willing to pay $10 for the first pizza slice, $9 for the next, and so on. The pizza costs nothing to make, the ingredients being donated for free by bulls. The company chooses to sell the pizza for $5 per slice, and Mark buys exactly 6 slices. The company's revenues from Mark are thus $30.
(a) What is the consumer surplus that Mark gets?
(b) The company is at risk of going out of business because of financial problems and asks Mark to pay it a $10 bribe to stay open and continue selling its specialty pizzas at $5 per slice. Assuming the demand in the question, should Mark be willing to give this payment? Explain.
My friend Mark has a substantial appetite. An innovative new pizza made with prairie oysters piques his interest. He has never had such a pizza before. His demand for this new delicacy is such that he is willing to pay $10 for the first pizza slice, $9 for the next, and so on. The pizza costs nothing to make, the ingredients being donated for free by bulls. The company chooses to sell the pizza for $5 per slice, and Mark buys exactly 6 slices. The company's revenues from Mark are thus $30.
(a) What is the consumer surplus that Mark gets?
(b) The company is at risk of going out of business because of financial problems and asks Mark to pay it a $10 bribe to stay open and continue selling its specialty pizzas at $5 per slice. Assuming the demand in the question, should Mark be willing to give this payment? Explain.
