A consumer is willing to pay a maximum of $5 for the first pretzel,$4 for the second pretzel,$3 for the third pretzel,$2 for the fourth pretzel,$1 for the fifth pretzel,and nothing for the sixth pretzel.If the price per unit of pretzel is $2,calculate the total benefit of the consumer.

Question

Quizplus · Accepted Answer

The consumer will buy the first two pretzels, as they are willing to pay more than the price per unit of $2 for each. They will not buy the third, fourth, or fifth pretzels, as the price per unit is more than they are willing to pay. Finally, they will not buy the sixth pretzel, as they are not willing to pay anything for it.

Therefore, the total benefit of the consumer is the sum of the maximum prices they are willing to pay for the first two pretzels, which is $5 + $4 = $9.

However, since the price per unit is $2, the consumer will end up paying $4 for the two pretzels. Therefore, their net benefit is $9 - $4 = $5.

Therefore, the best choice is B, which gives the total benefit of the consumer.

A Consumer Is Willing to Pay a Maximum of $5