Scenario 12-2 Suppose Regina and Ben Receive Great Satisfaction from Their Consumption

question 19

Multiple Choice

Scenario 12-2
Suppose Regina and Ben receive great satisfaction from their consumption of cheesecake. Regina would be willing to purchase only one slice and would pay up to $13 for it. Ben would be willing to pay $17 for his first slice, $14 for his second slice, and $10 for his third slice. The current market price is $10 per slice.
-Refer to Scenario 12-2. Assume that the government places a $4 tax on each slice of cheesecake and that the new equilibrium price is $14. What is Regina's consumer surplus from cheesecake?

• A)$0
• B)$4
• C)$14
• D)$13

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Definitions:

Fixed Cost

Costs that do not vary with the level of output or sales, such as rent, insurance, and salaries.

Revenue Line

Represents the income that a company generates from its normal business operations, typically shown at the top of an income statement.

Total Cost Line

A representation in graph form of the total cost of producing goods or services, which includes both fixed and variable costs, as a function of output level.

Operating Leverage

A measure of how revenue growth translates into growth in operating income, indicating the proportion of fixed to variable costs a company has.