John has a marginal benefit of $7 for 1 slice of pizza,$5 for a second slice,$3 for a third slice,$1 for a fourth slice,and $0.50 for a fifth slice.The price of pizza is $1.50 per slice.Which of the following statements is correct?
A) John will purchase 3 slices of pizza and have consumer surplus of $10.50.
B) John will purchase 4 slices of pizza and have consumer surplus of $12.00.
C) John will purchase 2 slices of pizza and have consumer surplus of $1.50.
D) John will purchase 3 slices of pizza and have consumer surplus of $4.50.
E) John will purchase 2 slices of pizza and have consumer surplus of $3.00.

Question

Quizplus · Accepted Answer

John's marginal benefit for the first three slices exceeds the price of $1.50, so he will purchase those slices. The fourth slice has a marginal benefit of $1, which is less than the price, so he will not purchase it. The fifth slice has a marginal benefit of $0.50, which is also less than the price, so he will not purchase it. Therefore, John will purchase 3 slices of pizza and have consumer surplus of $10.50.

John Has a Marginal Benefit of $7 for 1 Slice