Econ200_Quiz1_answerkey

# Econ200_Quiz1_answerkey - Econ 200 Quiz 1 1 Claire has the...

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1. Claire has the following marginal value schedule for CDs. (8 points) Econ 200 Quiz 1 Q MV TV TE CS 1 30 30 30 0 2 25 55 50 5 3 20 75 60 15 4 15 90 60 30 5 10 100 50 50 6 5 105 30 75 7 0 105 0 105 8 0 105 0 105 a). If the market price of CDs is \$15, how many will Claire buy? Why does she buy this many? (2 pts) Claire buys 4 CDs when the price is \$15. (1pt) She buys this many because this is the amount where the marginal value she gets from her last CD is equal to the price she has to pay for it. Any more CDs she could buy would cost her more than she values them (1pt). b). What is Claire's consumer surplus? Why does she get a consumer surplus? (3 pts) Claire’s consumer surplus is \$30 (2pts). She gets this surplus because she would have paid \$90 for the 4 CDs but she only has to pay \$60. This difference between her total value and total expenditures is the gains she gets from this trade (1pt). c). If Claire joins a CD club, she can buy CDs for \$10 each. How much would she be willing to pay to join this

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## This note was uploaded on 02/06/2010 for the course ECONOMICS 200 taught by Professor Stiban,f during the Winter '10 term at University of Warsaw.

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Econ200_Quiz1_answerkey - Econ 200 Quiz 1 1 Claire has the...

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