Assuming Suppose that Katie is a big movie fan and enjoys renting movies from the local video rental outlet. Assume that she is willing to pay $10 for the first movie she rents for the weekend but would only pay $8 for a second and still only $6 for a third movie (12 points). 

a. If the video rental franchise charges $7 per movie, how many movies will Katie be willing to rent for the weekend? And in this case, what will Katie's total consumer surplus be, and explain why? 

b. Assuming that the video rental franchise now has a new package deal in which it offers to rent three movies to customers at a price of $20.00, would Katie be interested and explain why? How much consumer surplus would she enjoy now? 

c. That the video rental franchise now has a new package deal in which it offers to rent three movies to customers at a price of $20.00, would Katie be interested and explain why?

Answer rating: 100% (QA)

Answer a To determine how many movies Katie will be willing to rent for the weekend when each movie costs 7 we need to compare the price she is willin... View the full answer