John Has a Marginal Benefit of $7 for 1 Slice

question 75

Multiple Choice

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.

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Definitions:

Compounded Annually

A method of calculating interest where the interest earned over a period is added to the principal, and the total becomes the base for the calculation of the next period's interest.

Lump Sum Payment

A payment made in a single lump sum amount, often used in the context of paying off debts or settling transactions.

Sinking Fund

A reserve fund established by setting aside revenue over a period of time to fund a future capital expense or repay a long-term debt.

Year-end Amounts

Refers to the final recorded figures of financial accounts at the end of the fiscal year, important for financial reporting and analysis.