Suppose that Anna goes to a coffee shop to get coffee. The maximum amount he is willing to pay for the first cup of coffee is $2.50, the second cup is $2.00, the third cup is $1.50; the fourth cup is $1.00, the fifth cup is $0.50, and the sixth cup is $0.00 The coffee shop charges a price of $2.00 per cup of coffee. If Anna is rational, she will purchase and gets consumer surplus of cups O 2; $0.50 O 6; $7.50 O 1; $0.50 O 3; $6.00
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- Non-linear pricing in water utilities: You are the manager of water utilities, and you are trying to determine how different water pricing schemes will affect consumption. One option for pricing is called decreasing block pricing, where the marginal price paid decreases with quantity paid. In particular, you are considering a decreasing block schedule where consumers pay $0.20 per gallon for the first 20 gallons consumed, and then $0.10 per gallon for any additional gallons consumed. For this decreasing block pricing scheme, draw the budget constraint for a consumer that has $10 of income, where the composite good is the good on the y-axis. Another option for pricing is called increasing block pricing, where the marginal price paid increases with the quantity paid. In particular, you are considering an increasing block schedule where consumers pay $0.20 per gallon for the first 20 gallons consumed, and then $0.40 per gallon for any additional gallons consumed. For this increasing…Q19 Let's assume that Justin Trudeau, who lives in Ottawa, is purchasing corn (C) and dandelion (D) in utility-maximizing amounts. If the price of corn (C) is $4 and the price of dandelion (D) is $2, then: Multiple Choice the marginal utility of dandelion is the same as that of corn. Justin Trudeau will buy only corn. the marginal utility of corn is twice that of dandelion. the marginal utility of corn is four times that of dandelion. the marginal utility of dandelion is twice that of corn.Assume that Raymond has $ 37.00 to spend on pretzels and beer. The price of pretzels is $3.00 and the price of beer is $5.00. Marginal utilities for each good are given below. Units MU P MU P / P P MU B MU B / P B 1st 18 6 40 8 2nd 15 5 30 6 3rd 12 4 25 5 4th 9 3 20 4 5th 6 2 15 3 6th 3 1 5 1 If Raymond were given an additional $ and he could be pretzels and beer in fractional quantities he would spend that $…
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