MsQuasimodo Has the Utility Function U(x, M)= 100x -

question 20

Multiple Choice

Ms.Quasimodo has the utility function U(x, m) = 100x - x²/2 + m, where x is her consumption of earplugs and m is money left over to spend on other stuff.If she has $10,000 to spend on earplugs and other stuff and if the price of earplugs rises from $50 to $65, then her net consumer's surplus

• A)falls by 2,637.50.
• B)falls by 525.
• C)falls by 637.50.
• D)increases by 318.75.
• E)increases by 1,275.

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Definitions:

Willingness to Pay

The maximum amount an individual is ready to sacrifice to acquire a good or benefit from a service.

Market Demand Curve

A graphical representation showing the relationship between the price of a good and the total amount of the good that all consumers are willing to purchase at each price level.

Willingness to Pay

The utmost price a consumer is ready to pay for a good or service, indicating its perceived value to them.

Consumer Surplus

The gap between the price consumers are ready to pay for a good or service and the price they actually pay.