Sebastian drinks Mountain Dew. He can buy as many cans of Mountain Dew as he wishes at a price of $0.50 per can. On a particular day, he is willing to pay $0.95 for the first can, $0.80 for the second can, $0.60 for the third can, and $0.40 for the fourth can. Assume Sebastian is rational in deciding how many cans to buy. His consumer surplus is

A) $0.50.
B) $0.85.
C) $1.05.
D) $1.20.

Question

Eleni Geberegzehabhare · Accepted Answer

Final Answer : B, Explanation :  Sebastian will buy the first three cans because his willingness to pay ($0.95, $0.80, $0.60) is greater than or equal to the price ($0.50). His consumer surplus is the sum of the differences between his willingness to pay and the price for these cans: ($0.95 - $0.50) + ($0.80 - $0.50) + ($0.60 - $0.50) = $0.45 + $0.30 + $0.10 = $0.85.

Definitions

Learning Objectives

Learning Objectives

Related questions