Jason Wants to Hire Maria to Tutor Him in Economics

question 152

Essay

Jason wants to hire Maria to tutor him in economics. Jason is willing to pay $30 for the first hour of tutoring, $25 for the second, $20 for the third, $15 for the fourth, and $10 for the fifth. Maria has an opportunity cost per hour of $6 for the first, $9 for the second, $12 for the third, $15 for the fourth, and $18 for the fifth. The initial equilibrium price for tutoring is $15 an hour and hence Maria tutors Jason for 4 hours. Now, Maria realizes that she is the only economics tutor because all the other tutors have graduated. Because she is the only tutor, she has a monopoly and, as a monopolist, Maria decides to charge a price of $25 instead of $15 an hour.
a) At the price of $25 an hour, how many hours will Maria tutor Jason?
b) At the initial equilibrium price of $15 an hour, what was Jason's total consumer surplus and Maria's total producer surplus?
c) At the price of $25 an hour, what is Jason's total consumer surplus and Maria's total producer surplus?
d) How does the sum of Jason's consumer surplus plus Maria's producer surplus compare at the initial equilibrium price of $15 an hour (part b) and at the new price of $25 an hour (part c)? Comment on any difference.

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Definitions:

Chest Pain

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Telephone Triage

A process of determining the level of urgency of each incoming telephone call and how it should be handled.

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Documents or instructions that provide specific advice or rules on how to perform tasks or handle situations, often used in professional and regulatory contexts.

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