Beachcomber Beatrice spent her entire wealth of 100,000 to build ...

[Mimi]

Beachcomber Beatrice spent her entire wealth of 100,000 to build a beach house on the Gulf of Mexico. There is a 10 percent chance that the house will be destroyed by a hurricane. Beatrice's utility of wealth schedule is given in the table above.
 
  What is the maximum amount that Beatrice would be willing to pay for an insurance policy that pays 100,000 if her beach house is destroyed by a hurricane? A) 10,000
  B) 30,000
  C) 40,000
  D) 60,000

Question 2

Is the marginal benefit someone receives from a good or service the same as the price the person pays? Explain your answer.
 
  What will be an ideal response?

[izzat]

Answer to Question 1

C

Answer to Question 2

Generally the marginal benefit of a good or service is different than the price that is paid. The marginal benefit is the maximum amount a consumer is willing to pay for a good or service. Typically the consumer can buy the good or service for a price less than the maximum. (Indeed, the difference between the maximum price the consumer is willing to pay and the price actually paid is the consumer surplus.) However, it might be the case that the price precisely equals the maximum the consumer is willing to pay. In this case alone, the marginal benefit equals the price. (And in this case, the amount of the consumer surplus equals zero.)

[Mimi]

Thank you

[izzat]

No problemo