Alex and Tyler enjoy the food at a restaurant named China star. Alex values a me
ID: 1223546 • Letter: A
Question
Alex and Tyler enjoy the food at a restaurant named China star. Alex values a meal there at $15 and Tyler values it at $26. If the restaurant charges only $10 a meal, what is Alex and Tyler's joint consumer surplus from a meal at China Star? $41 $31 $21 $16 If an American teenager will work for $5 an hour and an employer is willing to pay that wage, but the minimum wage is $7.25 an hour and the employer is not willing to pay that much, the teenager goes unemployed and the market experiences: lost gains from trade. wasteful increases in quality. resource misallocations. reductions in product quality. In the market for pharmaceuticals, the issue of "drug loss" illustrates which of the following ideas? The longer a drug is tested for safety, the lower is the opportunity cost in terms of lives lost. If a drug is not tested for safety, it might kill more people. Because of the higher the cost of testing a drug, fewer drugs are made, and more lives are lost. Lives are being lost because safe drugs that are still in the testing stage have not been approved.Explanation / Answer
a) Consumer surplus for alex:15-10=5; Consumer surplus for Tyler:26-10=16. Therefore, total consumer surplus is 21
Consumer surplus is defined as the difference between the total amount that consumers are willing and able to pay for a good or service
b) THe answer is lost gains from trade. This is because had an additional labour been employer then the marginal productivity (assuming increasing returns to scale) would have increased that is an additional output would have been produced. Thus, it would have led to an opportunity to trade. But when the labour has not been employed then the output has not been produced and therefore no trade and therefore no gain from trade.
c)
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