Suppose that RAM can be added to your computer at a cost of $50 per gigabyte. Suppose also that the value to you, measured in terms of your willingness to pay, of an additional gigabyte of memory is $800 for the first gigabyte, and then falls by one-half for each additional gigabyte.
a. How many gigabytes of memory should you purchase?
b. Suppose that your benefit for an additional gigabyte of memory rises to $1,600 for the first gigabyte, also falling by one-half for each additional gigabyte. How many gigabytes of memory should you purchase now, with both the lower price and the larger benefit?
