Question

Consider a situation in which a restaurant offers pizza by the slice. The current price is set by the restaurant at $2/slice. The additional, or incremental, benefit (B), per slice, obtained by a representative consumer from each additional slice of pizza is given by: B = 20 - 2Q, where Q is the number of slices consumed. Quantity of Pizza Consumed Marginal Benefit Marginal Cost 1 2 3 4 5 6 7 8 9 10 (a) (4 points) Complete the table. (b) (2 points) If the consumer wants to maximize net benefit (total benefit less the expenditure on pizza), what is the preferred quantity of pizza to consume? (c) (1 points) Plot total benefit against quantity of pizza consumed. Assume the consumer begins at Q=0, with zero total benefit. (d) (2 points) Plot total net benefit (total benefit less the expenditure on pizza), against quantity of pizza consumed. How does this inform your answer to (b)?

Answer 1