Suppose Hannah spends $3 to buy five biscuits. The marginal utility of the fifth biscuit is valued at $0.60. The total utility derived from five biscuits is valued at $4.20. Hannah's consumer surplus is valued at _____.

Question

Suppose Hannah spends $3 to buy five biscuits. The marginal utility of the fifth biscuit is valued at $0.60. The total utility derived from five biscuits is valued at $4.20. Hannah's consumer surplus is valued at _____.​

Quizplus · Accepted Answer

Consumer surplus is calculated as the total utility minus the total expenditure. Here, the total utility is $4.20, and the total expenditure is $3. Therefore, the consumer surplus is $4.20 - $3 = $1.20.

Suppose Hannah Spends $3 to Buy Five Biscuits