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E202ProblemSet5.3 - c Why is the compensation policy more...

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a. If the tour is “free” and the warden operates on a first-come, first-served basis, what will the total consumer surplus be for the four people who get to go on the tour that day? b. Suppose the warden solicits volunteers to postpone their tour by offering increasing amounts of cash compensation until only four people still wish to see the caves that day. If he gives each volunteer the same compensation payment, how much money will he have to offer to generate the required number of volunteers? What is the total economic surplus under this policy?
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Unformatted text preview: c. Why is the compensation policy more efficient than the first-come, first-served policy? d. Describe a way of financing the warden’s compensation payments that will make everyone, including the warden, either better off or no worse off than under the first-come, first-served approach. 4. Suppose the weekly demand for a certain good, in thousands of units, is given by the equation P = 8 - Q, and the weekly supply is given by the equation P = 2 + Q, where P is the price in dollars....
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