Samantha Values the Utility of Her First Cup of Coffee

question 152

Multiple Choice

Samantha values the utility of her first cup of coffee at $1.00; a second cup, $0.75; and a third cup, $0.50. If Samantha drinks three cups of coffee for breakfast, her marginal utility is equal to

• A) $0.50, the value of her last cup of coffee.
• B) $1.00, the value of her first cup of coffee.
• C) $2.25.
• D) $1.50.

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Definitions:

Deadweight Loss

A reduction in economic effectiveness that happens when a good or service does not reach or cannot reach equilibrium.

Monopolist

A single seller in a market who has significant control over the price and supply of a product.

Marginal Cost

The variation in the overall expense that occurs as a result of increasing the production quantity by one unit.

Consumer Surplus

The benefit consumers receive when they pay less for a product than what they were prepared to pay, measured by the area beneath the demand curve and above the price.