Henry is willing to pay 45 cents, and Janine is willing to pay 55 cents, for 1 pound of bananas. When the price of bananas falls from 50 cents a pound to 40 cents a pound,

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BlackTom AI · Accepted Answer

To evaluate consumer surplus changes, we first establish who buys at the initial price and at the new price, and then compute CS as WTP minus price for each buyer.
Option A: neither Janine nor Henry experiences an increase in consumer surplus. This would be false because Janine already buys at 50c (WTP 55c > 50c) and gains CS as the price falls to 40c, increasing her CS from 5c to 15c. For Henry, he does not buy at 50c (WTP 45c < 50c), so he has CS of 0 initially, and gains CS of 5c when the price drops to 40c and he can purchase. Thus both actually gain CS, not neither. 
Option B: Henry experiences an increase in consumer surplus, but Janine does not. This is incorrect because Janine’s CS also rises when price falls: from 5c at 50c to 15c at 40c. Henry does gain CS (from 0 to 5c) but the statement that Janine does not gain is false. 
Option C: both Janine and Henry experience an increase in consumer surplus. This matches the analysis: Janine’s CS grows from 5c to 15c, and Henry’s CS grows from 0 to 5c once the price falls and he can buy. The overall effect for both is an increase in CS. 
Option D: Janine experiences an increase in consumer surplus, but Henry does not. This is incorrect because Henry does experience an increase (he moves from not buying at 50c to buying at 40c with CS of 5c). Therefore, this option misstates Henry’s outcome. 
In summary, the only statement that aligns with the computed CS changes for both buyers is Option C, since both individuals gain consumer surplus when the price drops from 50c to 40c.

Henry is willing to pay 45 cents, and Janine is willing to pay 55 cents, for 1 pound of bananas. When the price of bananas falls from 50 cents a pound to 40 cents a pound,

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