Question 01: It's a hot day and Bert is thirsty. The below table shows the value, or "utility", Bert places on a bottle of water. Let's assume his "willingness to pay" will be equal to his "utility". Value of 1st bottle $7 of happiness or satisfaction $5 of happiness or satisfaction $3 of happiness or satisfaction $1 of happiness or satisfaction Value of 2nd bottle Value of 3rd bottle Value of 4th bottle a) If the actual price of a bottle of water is $4, how many bottles does Bert buy? b) How much consumer surplus does Bert get from his purchases? [this is the difference of what he was willing to pay minus what he actually paid – sum this for all bottles he purchases at $4] A) (a) 2 bottles; (b) consumer surplus = $3 for the 1st bottle + $1 for the second = $4 total B) (a) 3 bottles; (b) consumer surplus $3 for the 1st bottle + the other two cancel out C) (a) 1 bottles; (b) consumer surplus $3 for the 1st bottle
Question 01: It's a hot day and Bert is thirsty. The below table shows the value, or "utility", Bert places on a bottle of water. Let's assume his "willingness to pay" will be equal to his "utility". Value of 1st bottle $7 of happiness or satisfaction $5 of happiness or satisfaction $3 of happiness or satisfaction $1 of happiness or satisfaction Value of 2nd bottle Value of 3rd bottle Value of 4th bottle a) If the actual price of a bottle of water is $4, how many bottles does Bert buy? b) How much consumer surplus does Bert get from his purchases? [this is the difference of what he was willing to pay minus what he actually paid – sum this for all bottles he purchases at $4] A) (a) 2 bottles; (b) consumer surplus = $3 for the 1st bottle + $1 for the second = $4 total B) (a) 3 bottles; (b) consumer surplus $3 for the 1st bottle + the other two cancel out C) (a) 1 bottles; (b) consumer surplus $3 for the 1st bottle
Principles of Economics (MindTap Course List)
8th Edition
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter21: The Theory Of Consumer Choice
Section: Chapter Questions
Problem 12PA
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![Question 01: It's a hot day and Bert is thirsty. The below table shows the value, or
"utility", Bert places on a bottle of water. Let's assume his "willingness to pay" will be
equal to his "utility".
$7 of happiness or
satisfaction
$5 of happiness or
Value of 1st bottle
Value of 2nd bottle
satisfaction
$3 of happiness or
satisfaction
$1 of happiness or
satisfaction
Value of 3rd bottle
Value of 4th bottle
a)
If the actual price of a bottle of water is $4, how many bottles does Bert buy?
b) How much consumer surplus does Bert get from his purchases? [this is the
difference of what he was willing to pay minus what he actually paid - sum
this for all bottles he purchases at $4]
A) (a) 2 bottles; (b) consumer surplus $3 for the 1st bottle + $1 for the second
= $4 total
B)
(a) 3 bottles; (b) consumer surplus $3 for the 1st bottle + the other two
cancel out
C)
(a) 1 bottles; (b) consumer surplus $3 for the 1st bottle](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F3e563a99-49ab-41ec-8af9-0409419bf522%2Ff7b82f7c-a34b-4415-a02d-28192e1eafd6%2Fedcuj8h_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Question 01: It's a hot day and Bert is thirsty. The below table shows the value, or
"utility", Bert places on a bottle of water. Let's assume his "willingness to pay" will be
equal to his "utility".
$7 of happiness or
satisfaction
$5 of happiness or
Value of 1st bottle
Value of 2nd bottle
satisfaction
$3 of happiness or
satisfaction
$1 of happiness or
satisfaction
Value of 3rd bottle
Value of 4th bottle
a)
If the actual price of a bottle of water is $4, how many bottles does Bert buy?
b) How much consumer surplus does Bert get from his purchases? [this is the
difference of what he was willing to pay minus what he actually paid - sum
this for all bottles he purchases at $4]
A) (a) 2 bottles; (b) consumer surplus $3 for the 1st bottle + $1 for the second
= $4 total
B)
(a) 3 bottles; (b) consumer surplus $3 for the 1st bottle + the other two
cancel out
C)
(a) 1 bottles; (b) consumer surplus $3 for the 1st bottle
![Question 2 (1 point)
Question 01: It's a hot day and Bert is thirsty. The below table shows the value, or
"utility", Bert places on a bottle of water. Let's assume his "willingness to pay" will be
equal to his "utility".
c) If the price of a bottle of water falls to $2, how does the quantity demanded
change? Compare this with your answer in part (a) – does the law of demand
hold?
(c) If the price falls to $2 Bert will buy just 1 bottle. The law of demand does
A)
not hold because there is a positive relationship between price and quantity
demanded.
(c) If the price falls to $2 Bert will buy only 2 bottles. The law of demand does
B)
not hold because there is no relationship between price and quantity
demanded.
(c) If the price falls to $2 Bert will buy 3 bottles, but not the 4th bottle as the
happiness he would get from the 4th is less than the cost (price). The law of
demand holds because there is a negative relationship between price and
quantity demanded.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F3e563a99-49ab-41ec-8af9-0409419bf522%2Ff7b82f7c-a34b-4415-a02d-28192e1eafd6%2F3yjnvj6_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Question 2 (1 point)
Question 01: It's a hot day and Bert is thirsty. The below table shows the value, or
"utility", Bert places on a bottle of water. Let's assume his "willingness to pay" will be
equal to his "utility".
c) If the price of a bottle of water falls to $2, how does the quantity demanded
change? Compare this with your answer in part (a) – does the law of demand
hold?
(c) If the price falls to $2 Bert will buy just 1 bottle. The law of demand does
A)
not hold because there is a positive relationship between price and quantity
demanded.
(c) If the price falls to $2 Bert will buy only 2 bottles. The law of demand does
B)
not hold because there is no relationship between price and quantity
demanded.
(c) If the price falls to $2 Bert will buy 3 bottles, but not the 4th bottle as the
happiness he would get from the 4th is less than the cost (price). The law of
demand holds because there is a negative relationship between price and
quantity demanded.
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