Question

The many identical residents of Whoville love drinking Zlurp. Each resident has the following willingness to pay for the tasty refreshment: Quantity Willingness to Pay (Dollars) First bottle 10 Second bottle 8 Third bottle 6 Fourth bottle 4 Fifth bottle 2 Further bottles 0 The cost of producing a bottle of Zlurp is $3.50 and the competitive suppliers sell it at this price. (The supply curve is horizontal.) Each Whovillian will consumebottles and receive a consumer surplus of. Producing Zlurp creates pollution. Each bottle has an external cost of $1. Taking this additional cost into account total surplus per person in the allocation you previously determined decreases to. Cindy Lou Who one of the residents of Whoville, decides on her own to reduce her cons__________

Answer 1

Cindy Lou Who will reduce her consumption of Zlurp.

Step-by-step explanation:

In this scenario, Cindy Lou Who, a resident of Whoville, decides to reduce her consumption of Zlurp, the tasty refreshment that the residents love drinking. The willingness to pay for each additional bottle of Zlurp decreases to zero after the fifth bottle. With the cost of producing a bottle of Zlurp at $3.50 and the inclusion of an external cost of $1 for pollution, the total surplus per person decreases. To reduce her consumption, Cindy Lou Who will simply drink fewer bottles of Zlurp.