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4. If the price of novels is $10 Joe will enjoy consumer surplus equal to:
The first thing to do with this question is determine how many novels he will buy. Once we look at the marginal utility column it's easy to see that he will buy 5 novels when they cost $10. His total expenditure will be $10 x 5 novels = $50 and from the table we know that his total utility is $88. His consumer surplus is simply the difference between these two: CS = $88 - $50 = $38.
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| Joe's Utility |
| Novels | Utility in $ | MU |
| 0 | $0 | $0 |
| 1 | $25 | $25 |
| 2 | $45 | $20 |
| 3 | $63 | $18 |
| 4 | $77 | $14 |
| 5 | $88 | $11 |
| 6 | $96 | $8 |
|
