1. What is the diamonds-water paradox, and how is it explained?
2. Use the reasoning as in question 1 to explain why bottle water cost so much more than tap water.
3. If consumers paid an amount for water that reflected the value of the total benefits they received from the consuming it, then what would consumer surplus equal?
1. Medicare recipients pay a monthly premium for coverage, must meet a annual deductible, and have a co-payment for doctors office visits. What impact would an increase in the monthly premium have on their consumer surplus? What would be the impact of reductions.
2. President George W Bush introduced some new coverage for prescription medication. What is the impact on coverage surplus of offering some coverage for prescription medication.