The following is a table showing Erica's marginal benefit from purchasing bottles of soda and bottles of iced tea from a grocery store. Quantity of Soda (in bottles) 1 2 3 4 5 Marginal Benefit of Soda (in dollars) 24 18 12 6 3 Quantity of Iced Tea (In bottles) 1 2 3 4 5 Marginal Benefit of Iced Tea (in dollars) 24 18 12 6 3 A. What is Erica's total benefit from purchasing 2 bottles of soda and 1 bottle of iced tea? Show your work. B. Assume the price of a bottle of iced tea is $5. Calculate the total consumer surplus if Erica purchases 3 bottles of iced tea. Show your work. C. Now assume the price of a bottle of soda is $3 and the price of a bottle of iced tea is $6. Erica spends her entire budget of $30 on bottles of soda and iced tea. i. Explain why Erica does not maximize her benefit when she purchases 2 bottles of soda and 4 bottles of iced tea. Use marginal analysis to explain your answer.

The following is a table showing Erica's marginal benefit from purchasing bottles of soda and bottles of iced tea from a grocery store. Quantity of Soda (in bottles) 1 2 3 4 5 Marginal Benefit of Soda (in dollars) 24 18 12 6 3 Quantity of Iced Tea (In bottles) 1 2 3 4 5 Marginal Benefit of Iced Tea (in dollars) 24 18 12 6 3 A. What is Erica's total benefit from purchasing 2 bottles of soda and 1 bottle of iced tea? Show your work. B. Assume the price of a bottle of iced tea is $5. Calculate the total consumer surplus if Erica purchases 3 bottles of iced tea. Show your work. C. Now assume the price of a bottle of soda is $3 and the price of a bottle of iced tea is $6. Erica spends her entire budget of $30 on bottles of soda and iced tea. i. Explain why Erica does not maximize her benefit when she purchases 2 bottles of soda and 4 bottles of iced tea. Use marginal analysis to explain your answer.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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13_Economics