Question 3 Suppose that there are four consumers willing to pay the following amounts for haircuts: Dave: $14; Charlie $4; Alice: $16; Kitty:

Question 3

Suppose that there are four consumers willing to pay the following amounts for haircuts:

Dave: $14; Charlie $4; Alice: $16; Kitty: $10.

Suppose that there are four barbers with the following costs for cutting hair:

Firm A: $6; Firm B: $12; Firm C: $8; Firm D: $4.

In addition, assume that each barber has the capacity to produce only one haircut.

a) How many haircuts should be given to maximize efficiency? Explain.

b) Which Barbers should cut hair? Explain.

c) How large is the maximum possible total surplus?