Question

The marginal benefit to Bob of a taxi ride to work today is $5. The price of a such a ride is $4 and is equal to the marginal cost of the ride to Bob. Assuming Bob is rational, it follows that:
a. There is not enough information to determine whether or not Bob will choose to ride to work in a taxi today.
b. Bob will enjoy a net gain by riding to work in a taxi today.
c. Bob will not choose to ride in a taxi today.
d. Bob will choose to ride to work in a taxi today.
e. Both (b) and (d)

Answer 1

Answer:

e. Both (b) and (d)

Explanation:

First, bob will choose to ride to work as the marginal cost of the ride is the same as the price of the ride. but also, it will enjoy a net gain as Bob was willing to pay up to 5 dollars for the ride thus, there is a consumer surplus of $1

We can also state that bob will continue to ride the taxes as long as the cost is $5 dollars or less as it provide benefit for him.