Determining Consumer Surplus for Sweetbrand Cheesecakes

The table shows the maximum consumer willingness to pay for Sweetbrand cheesecakes. Which of the four consumers receives the smallest consumer surplus if the market price of the cheesecakes is $12.50 each?

Table: Sweetbrand Cheesecakes

Consumer Maximum Willingness to pay for Sweetbrand Cheesecakes Fred $11.65 Sam 17.99 Merry 12.99 Piper 16.75

The table shows the maximum consumer willingness to pay for Sweetbrand cheesecakes. Which of the four consumers receives the smallest consumer surplus if the market price of the cheesecakes is $12.50 each? Piper

Fred

Merry

Sam

To determine which consumer receives the smallest consumer surplus, we first need to calculate the consumer surplus for each consumer. Consumer surplus is calculated as the difference between the maximum willingness to pay and the market price.

The market price of the cheesecakes is $12.50.

1. Fred:

   • Maximum willingness to pay: $11.65
   • Consumer surplus: $11.65 - $12.50 = -$0.85 (Fred does not buy the cheesecake)

2. Sam:

   • Maximum willingness to pay: $17.99
   • Consumer surplus: $17.99 - $12.50 = $5.49

3. Merry:

   • Maximum willingness to pay: $12.99
   • Consumer surplus: $12.99 - $12.50 = $0.49

4. Piper:

   • Maximum willingness to pay: $16.75
   • Consumer surplus: $16.75 - $12.50 = $4.25

Now, let's summarize the consumer surplus for each consumer:

• Fred: -$0.85 (does not buy)
• Sam: $5.49
• Merry: $0.49
• Piper: $4.25

Since Fred has a negative consumer surplus (indicating he does not purchase the cheesecake), he effectively receives the smallest consumer surplus.

Thus, the answer is Fred.