Log in
Economics
1
answer
0
watching
86
views
4 Mar 2018

Use the following information to answer the next 3 questions. The following table reflects the willingness of Earl, Mooch, Ozzie, and Shnelly to pay for different quantities of milkhakes. For example, after consuming 2 milkshakes, Earl would be wiling to pay $1 for a third milkshake. Willingness to Pay 1st Shake 2nd Shake 3rd Shake 4th Shake $3 $1 $4 $2 Earl Mooch Ozzie Shnelly $6 You should assume that a consumer always purchases a good if his or her willingness to pay is greater than or equal to the price of the good. 4. If the price of milkshakes is $4 per shake, then what will be the quantity of shakes demanded? (a) 5 milkshakes. (b) 4 milkshakes. (c) 6 milkshakes. (d) 3 milkshakes.

word_media_image1.jpeg
Watch
1
answer
0
watching
86
views

For unlimited access to Homework Help, a Homework+ subscription is required.

Hubert Koch
Hubert KochLv2
6 Mar 2018

Unlock all answers

Get 1 free homework help answer.
Already have an account? Log in
Share

Related textbook solutions

Principles of Economics
2nd Edition, 2017
Openstax
ISBN: 9781947172364
Principles of Macroeconomics
2 Edition,
Openstax
ISBN: 9781947172388
Principles of Microeconomics
2 Edition,
Openstax
ISBN: 9781947172340

Related questions

True or False:

1. Consumer surplus is the buyer's willingness-to-pay minus the seller's opportunity cost of production.

2. If your willingness-to-pay for a hamburger is $3 and you paid $2, then your consumer surplus is $5.00

3. The opportunity cost of production for a seller includes the implicit cost of the seller's time.

4. The height of the supply curve at a selected quantity is the seller's opportunity cost of producing that marginal unit.

5. Total surplus (total well-being) is the seller's cost of production minus the buyer's willingness-to-pay.

6. The competitive market equilibrium outcome is efficient because it allocates the produced output to the buyers who place the highest value on the good

7. Producer surplus is the area above the supply curve and below the price.

8. The competitive market equilibrium outcome maximizes total surplus (total well-being)

9. Producing and consuming more of a good will always increase the total surplus(total well-being).

You are a produce grocer who sells two products: apples and bananas (you sell them in bushels, but we’ll just consider a bushel to be one unit of fruit). Each costs you $1 per bushel wholesale, which is your only cost. You can prevent resale among your customers, of which there are three, each with unit inelastic demand. Consumer 1 has a willingness to pay of $2 per apple (bushel) and $8 per banana (bushel). For Consumer 2, the willingness to pay is $4 for apples and $6 for bananas. Consumer 3 would pay up to $9 for apples but only $1 for bananas.

A. Suppose you price apples and bananas separately. What is the profit-maximizing price for each?

B. What is the profit-maximizing price if you sell the two fruit as a pure bundle?

C. What leads to higher profits – selling separately or offering a pure bundle? Explain how this answer relates to the correlation in consumers’ willingness to pay across apples and bananas.

D. Can you do better by mixed bundling? Explain why or why not?

E. Does your answer to part (d) change if your production cost is $3 per unit instead?

On Tuesday nights, a local restaurant has certain number of kids: 

No. Willingness to pay
1        $5
2        $4
3        $3
4        $2
5        $1
6        $0

If the price of an additional serving of chicken nuggets is $3, how many servings will Nina buy for Braden? She will buy 3, because willingness to pay is greater than or equal to the price. She will not buy the 4th because she is willing to pay $2, but they are charging $3.

How much consumer surplus does he receive?

The following week, Nina and Braden are back at the restaurant again, but now the price of a serving of chicken nuggets is $4. By how much does his consumer surplus decrease compared to the previous week?

One week later, they return to the restaurant again. Nina discovers that the restaurant is offering an all-you-can-eat special for $12. How many chicken nugget servings will Braden eat, and how much consumer surplus does he receive now?

Suppose you own the restaurant and Braden is a typical customer. What is the highest price you can charge for the all-you-can-eat special and still attract customers?

Related Documents

ECO204Y1 Lecture Notes - Lecture 4: Slutsky Equation, Marginal Utility, Quasilinear Utility
bronzelizard410
ECO101H1
Final Exam
Study Guide
ECO101H1 Study Guide - Final Guide: Economic Surplus, Economic Equilibrium, Marginal Cost
turquoisegnu128
ECO 201
Final Exam
Study Guide
ECO 201 Study Guide - Quiz Guide: Milkshake, Delicatessen, Opportunity Cost
turquoisegnu128

Weekly leaderboard

Home
Homework Help 3,900,000
Economics 400,000
Start filling in the gaps now
Log in