Consider the Following Scenario to Answer the Following Questions: the Varsity,located

question 70

Multiple Choice

Consider the following scenario to answer the following questions: The Varsity,located in downtown Atlanta,is the world's largest drive-in restaurant.Located near the Georgia Tech campus,the drive-in attracts two distinct types of customers-college students and visitors to Atlanta.The owners are considering offering a student discount of $1 off their combo meal,which is regularly priced at $9.There are 5,000 students interested in purchasing a combo meal,with a maximum willingness to pay of $8.There are 5,000 visiting customers interested in purchasing the combo meal,with a maximum willingness to pay of $9.Assume that each customer,at most,will purchase a single meal and the marginal cost is $5.
-What is the difference in the amount of total consumer surplus if the Varsity offers the combo meal at the single price of $8 per combo meal instead of the previous single price of $9 per combo meal?

• A) no change
• B) $16,500 decrease
• C) $15,000 decrease
• D) $10,000 increase
• E) $5,000 increase

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Definitions:

Subsidizes Housing

A government support mechanism that helps reduce the cost of housing making it more affordable for low-income individuals.

Lump Sum Transfer

A one-time payment of money or resources, usually not expected to be repaid.

Budget Line

A graphical representation showing all possible combinations of two goods that can be purchased at given prices and income level.

Government Housing Assistance

Programs offered by the government to provide affordable housing or financial aid to individuals and families in need.