Chapter 7 - Part III - Consumers, Producers, and the Efficiency of Markets - Problems and Applications - Page 152: 1

a. \$200 b. \$110 c. Consumer surplus doesn't exist as the willingness to pay is less than the price of iPhone and therefore Mellisa wouldn't buy the iPhone at a price of \$250

Mellisa's Consumer surplus = \$80 Price of iPhone = \$120 a. Consumer Surplus = WIllingness to pay - Amount actually paid i.e., Willingness to pay = Amount actually paid + Consumer Surplus = \$120 + \$80 = \$200 b. If the iPhone was bought at \$90, then Consumer surplus = Willingness to pay - Amount actually paid = \$200 - \$90 = \$110 c. If the iPhone is priced at \$250, Consumer Surplus = Willingness to pay - Amount actually paid = \$200 - \$250 = -\$50 Since willingness to pay is less than the price of the iPhone, Mellisa wouldn't buy the iPhone at this price. Consumer Surplus can never be negative.