Question

The table below gives Robbie's willingness to pay (utility) for various hours of on-line computer access per week. Suppose that Robbie's marginal utility is measured in SUS. On-line time is priced at $12 per hour. Number of Hours Total Utility (S) 1 20 2 38 3 54 4 68 80 90 6 7 98 8 104 a. Compute the marginal utility for each hour b. b. How many hours of on-line service will Robbie purchase? c. Compute Robbie's consumer surplus for this good. C.

Answer 1

a)

Number of hours(Q)	TU($)	MU($) =∆TU/∆Q
0	0
1	20	20
2	38	18
3	54	16
4	68	14
5	80	12
6	90	10
7	98	8
8	104	6

b) 5 hours of online services Robbie will purchase, because at 5 hours MU = P = $12.

c) Consumer surplus = 80 - (12 * 5) = $20