5. The accompanying table shows seven consumers' willingness-to-pay (or their individual marginal benefit) in USD for on

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5 The Accompanying Table Shows Seven Consumers Willingness To Pay Or Their Individual Marginal Benefit In Usd For On 1 (143.1 KiB) Viewed 44 times

5. The accompanying table shows seven consumers' willingness-to-pay (or their individual marginal benefit) in USD for one MP3 file copy of a new album by Hootie and the Blowfish. Consumer Adriana Bhagesh Chizuke Denzel Emma Frank Stevie Individual Marginal Benefit ($) $2 15 1 10 5 4 0 The marginal cost of making the file accessible to one additional consumer is constant and equal to zero. a. What would be the efficient (or “socially optimal”) price to charge for a download of the file? [Hint: Remember that the efficient allocation is the one that sets price equal to marginal cost.] b. Suppose all seven consumers are able to download the file for free from a file- sharing service, Panster, Which consumers will download the file? What will be the total consumer surplus? c. Panster is shut down for copyright law infringement. In order to download the file, consumers now have to pay $4.99 at a commercial music site. (Assume the marginal cost to the firm is still zero.) i. Which consumers will download the file? ii. What will be the total consumer surplus? iii. How much producer surplus accrues to the commercial music site? iv. What is the total surplus? v. What is the deadweight loss from the new pricing policy? d. Note that this type of good is excludable but nonrival. Why do you think goods like this are sometimes referred to as “artificially scarce goods”?