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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". 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

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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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
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.
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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