Karen is planning her wedding and needs to rent tents for an outdoor reception.

Question

Karen is planning her wedding and needs to rent tents for an outdoor reception. The middle column in the following table reflects Karen's total benefits, or her total willingness to pay for tent rentals. The third column shows the total cost associated with renting from a local tent company.


Total Number of Tents Total Benefit Total Cost

1 $ 1,800 $ 1,400
2 $ 3,300 $ 2,800
3 $ 4,500 $ 4,200
4 $ 5,400 $ 5,600
5 $ 6,000 $ 7,000
6 $ 6,400 $ 8,400


1)The optimal number of tents for Karen to rent is:


A. Two tents

B. Three tents

C. Four tents

D. Five tents

E. Six tents


2) Which of the following statements is true?



A. Karen's marginal benefits associated with renting additional tents increase.

B. Karen's marginal benefits associated with renting additional tents are constant.

C. Karen's marginal benefits associated with renting additional tents decrease.


3)Which of the following statements is true?




A. The marginal cost associated with renting additional tents increases.

B. The marginal cost associated with renting additional tents is constant.

C. The marginal cost associated with renting additional tents decreases.


4) The company from which Karen is renting decides to try a new pricing strategy whereby the additional cost falls as more tents are rented. The following chart details Karen's total willingness to pay and the total cost of renting tents under the company's new pricing guidelines:


Total Number of Tents Total Benefit Total Cost

1 $ 1,800 $ 1,600
2 $ 3,300 $ 3,000
3 $ 4,500 $ 4,100
4 $ 5,400 $ 4,900
5 $ 6,000 $ 5,600
6 $ 6,400 $ 6,100

How many tents will Karen rent under the new pricing strategy?

Explanation / Answer

C. Four tents B. Karen's marginal benefits associated with renting additional tents are constant. B. The marginal cost associated with renting additional tents is constant. 5 $ 6,000 $ 5,600

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