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ECON200 QUIZ1 - Quiz 1-Econ 200A 30 points ANSWER KEY...

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Quiz 1-Econ 200A Fall 2009 30 points- ANSWER KEY Please write legibly. Illegible writing will result in lost points. 1. (18 points) Mona purchases a variety of goods and services. Among them, Mona buys entertainment services by attending concerts. Mona’s marginal values and total values (to be calculated) for concerts per year are as follows: Number of concerts per year Marginal Value ($) Total Value ($) 1 60 60 2 55 115 3 50 165 4 45 210 5 40 250 a. Fill in the column above for the Total Values of various numbers of concerts per year. (5 points) b. Now suppose the market price of a concert is $45. How many concerts will Mona attend per year? How did you choose your answer? (5 points) Mona purchases concerts up to where her MV = Price of concert. This is achieved at 4 concerts per year. [She maximizes his CS with this choice!] 2. Consider the table of MV for Mona in question 1 above. Suppose the price of a concert is $45. How much would Mona need to be paid so that she would be willing to pay a price of $50 per concert instead of $45? Show your work and briefly explain. (8 points)
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