Question

3. Brandon and his family often rent movies from the new internet movie streaming service, Xanadu. The table below shows Brandon’s demand schedule for eight movie rentals that Brandon’s family is interested in watching.

Number of internet movie rentals	Willingness to pay each rental
1st	$7
2nd	$6
3rd	$5
4th	$4
5th	$3
6th	$2
7th	$1
8th	$0

a. If the price of each movie rental from Xanadu is $3, how many movie rentals will Brandon buy and how much consumer surplus does Brandon receive? Explain your answer. (5 points)

b. If the price of each movie rental from Xanadu is $5, how many movie rentals will Brandon buy and how much consumer surplus does Brandon receive? Explain your answer. (5 points)

c. If the Xanadu online service offers as many movie rentals as the customer wants to download, all for a one-time fee of $25.00, how many movie rentals will Brandon download and how much consumer surplus will Brandon receive? Explain your answer. (5 points)

d. If the Xanadu online service offers as many movie rentals as the customer wants to download, all for a one-time fee of $35.00, how many movie rentals will Brandon download and how much consumer surplus will Brandon receive? Explain your answer. (5 points)

e. If the Xanadu’s market research showed that Brandon’s demand represented what most of Xanadu’s customers wanted, what would be the most that Xanadu could charge as a one-time fee for all the downloads that the customer wanted? (4 points)

4. Newspaper vending machines are designed so that once you have paid for one paper; you have access to all the papers in the machine and could take multiple papers at a time. However, other vending machines dispense only one item (the item you bought). You do not have access to all the goods (sodas, candy, snacks, etc.) at one time. Using the concept of marginal utility, explain why these vending machines differ? (6 points)

Answer 1