Question

Tabitha shares a flea market booth with her sister. Her share of the rent is $150 per month. She is considering moving to her own, larger booth which she will not have to share with anyone. The larger booth rents for $450 per month. Recently, you ran into Tabitha in the grocery store and she tells you that she has rented the larger booth. Tabitha is as rational as any other person. You rightly concluded that

Answer 1

Answer: B. Tabitha figures that the additional benefit of having her own booth ( as opposed to sharing) is at least $300.

Explanation:

When Tabitha moved booths, she began to pay $450 per month. The difference between this cost and the cost she was previously paying is:

= 450 - 150

= $300

If Tabitha is paying $300 extra, it must mean that the benefit she is getting from being in her own booth is at least $300 because that would be the only way she would not be making a loss. Were the benefits anything less than $300, she would be making a loss and it would not make any sense for her to continue renting the booth.