You are a dog walker. You are willing to accept as low as $12 per dog walk. Your neighbor has a dog and she is willing to pay as much as $15 per walk.Suppose, instead, you walk her dog for $13. In this case, what is the TOTAL SURPLUS associated with this dog walk? Remember total surplus equals consumer surplus plus producer surplus (just enter numerals, no dollar signs or words)3Save AnswerQuestion 6:*Unsaved ChangesQ71 PointGrading comment:Again, your WTA is $12 and your neighbor's WTP is $15. THe price is $13.Now suppose the Iowa City City Council passes an ordinance setting a minimum fee of $20 per walk. After this ordinance takes effect, will your neighbor still hire you to walk her dog?Choice 1 of 3:YesChoice 2 of 3:NoChoice 3 of 3:DependsSave AnswerQuestion 7:*Unsaved ChangesQ81 PointGrading comment:After the city sets a minimum fee of $20 per dog walk, what is the deadweight loss per dog walk? (Numerals only)
Question
You are a dog walker. You are willing to accept as low as 15 per walk.Suppose, instead, you walk her dog for 12 and your neighbor's WTP is 13.Now suppose the Iowa City City Council passes an ordinance setting a minimum fee of 20 per dog walk, what is the deadweight loss per dog walk? (Numerals only)
Solution
For the first question, the total surplus would be calculated as follows:
Consumer surplus is the difference between what the consumer is willing to pay and what they actually pay. In this case, your neighbor is willing to pay 13, so the consumer surplus is 13 = $2.
Producer surplus is the difference between what the producer is willing to accept and what they actually receive. In this case, you are willing to accept 13, so the producer surplus is 12 = $1.
Total surplus is the sum of consumer surplus and producer surplus, so in this case, the total surplus is 1 = $3.
For the second question, if the city council passes an ordinance setting a minimum fee of 15 per walk.
For the third question, the deadweight loss per dog walk after the city sets a minimum fee of 20 - 5.
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