When Chandra is hiking on a hot day without any water, she is willing to pay up to $6 for a bottle of water. When she does her grocery shopping, she is not willing to pay more than $3.60 for a case of 36 bottles of water. If Chandra buys a case of 36 bottles for $3.60, or $.10 per bottle, her consumer surplus is _____ on the first bottle and is _____ on the 36th bottle.
A)$106.20; $.10
B)$212.40; $106.20
C)$6; $.10
D)$5.90; $0

Question

Quizplus · Accepted Answer

Chandra's maximum willingness to pay for one bottle of water is $6. Therefore, her consumer surplus for the first bottle is:

Consumer Surplus for first bottle = Maximum willingness to pay - Price she actually pays
= $6 - $0.10
= $5.90

For the 36th bottle, the price she pays is still $0.10, but her willingness to pay is now only $3.60 since that is the most she would pay for a case of 36 bottles. Therefore, her consumer surplus for the 36th bottle is:

Consumer Surplus for 36th bottle = Maximum willingness to pay - Price she actually pays
= $3.60 - $0.10
= $3.50

Since Chandra buys a case of 36 bottles, her total consumer surplus is the sum of consumer surplus for each individual bottle. Therefore, her total consumer surplus is:

Total Consumer Surplus = Consumer Surplus for first bottle + Consumer Surplus for second bottle + ... + Consumer Surplus for 36th bottle
= $5.90 + $5.80 + $5.70 + ... + $3.50
= $106.20

Therefore, the best choice is D, and Chandra's consumer surplus on the first bottle is $5.90 and on the 36th bottle is $3.50.

When Chandra Is Hiking on a Hot Day Without Any