Consumer Compensation. Suppose your college grants Coca-Cola a monopoly in selling soft drinks on campus. Your job is to compute how much each student should be paid to compensate for his or her consumer cost of the monopoly. Suppose Coca-Cola increased the price of soft drinks by $0.30 per can and each student consumed 10 soft drinks before the monopoly was granted.

a. Kate continues to buy 10 soft drinks at the higher price. What is the appropriate compensation? $ nothing (enter your response rounded to the nearest penny).

b. Elise buys only 4 soft drinks at the higher price. Her demand curve is linear. What is the appropriate compensation?

1) First, we have to calculate the appropriate compensation for Kate, which is given by the increase in price of the drink for the number of drinks consumed by Kate:

ACK=0.30*10= $3

ACK=3

2) Now, the proper compensation for elisa (we calculate it the same way we do for Kate) is given by:

ACE=0.30*4= $1.2

ACE=1.2

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