On Thursday nights, a local restaurant has pasta special. Ari likes the restaurant’s pasta, and his willingness to pay for each serving is shown in the accompanying table.
Willingness to pay
Quantity of pasta for pasta
(servings) (per serving)
1……………………………… $10
2……………………………… 8
3……………………………… 6
4……………………………… 4
5……………………………… 2
6……………………………… 0
a. If the price of a serving of pasta is $4, how many servings will Ari buy? How much consumer surplus does he receive?
b. The following week, Ari is back at the restaurant again, but now the price of a serving of pasta is $6. By how much does his consumer surplus decrease compared to the previous week?
c. One week later, he goes to the restaurant again. He discovers that the restaurant is offering an "all-you-can-eat" special for $25. How much pasta will Ari eat, and how much consumer surplus does he receive now?
d. Suppose you own the restaurant and Ari is a typical customer. What is the highest price you can charge for the "all-you-can-eat" special and still attract customers?