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Chad is willing to pay $5.00 to get his first cup of morning latt; he is willing to pay $4.50 for a second cup. He buys his first cup from a vendor...

Chad is willing to pay $5.00 to get his first cup of morning latté; he is willing to pay $4.50 for a second cup. He buys his first cup from a vendor selling latté for $3.75 per cup. He returns to that vendor later in the morning to find that the vendor has increased her price to $3.90 per cup. Chad buys a second cup. Which of the following statements is correct?
Choose one answer.
a. Chad’s willingness to pay for his second cup of latté was smaller than his willingness to pay for his first cup of latté.
b. Chad’s consumer surplus on his second cup of latté was larger than his consumer surplus on his first cup of latté.
c. Chad is irrational in that he is willing to pay a different price for his second cup of latté than what he is willing to pay for his first cup of latté.
d. Chad places a higher value on his second cup of latté than on his first cup of latté.
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Economics-8096115.doc

Question:
Chad is willing to pay $5.00 to get his first cup of morning latté; he is willing to pay $4.50 for a
second cup. He buys his first cup from a vendor selling latté for $3.75 per cup. He...

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