Question

A restaurant offers an "all you can eat" meal for $9. Tyrone has eaten three servings and is trying to decide whether or not to go back for a fourth. The economic way of thinking suggests that Tyrone should go back for the fourth serving if and only if:_______.
a. his marginal benefit of the additional serving is greater than zero.
b. his marginal benefit of the additional serving is at least $3.
c. his marginal benefit of the additional serving is $9 or more.
d. his total value from the meal exceeds $ Because information is costly to acquire.

Answer 1

Answer:

a. his marginal benefit of the additional serving is greater than zero.

Explanation:

While consuming an additional unit of a commodity : consumer compares it's marginal/additional benefit (utility) MU with marginal/ additional cost i.e price P. Hence, equilibrium is where : Marginal Utility MU = Price P

However in this case, 'all you can eat' i.e unlimited food at $9. So, there is no additional cost for consuming 4th serving.

So, Tyrone will take consumption decision based on only marginal benefit - will consume if the marginal benefit i.e additional satisfaction from the 4th serving consumption > 0, because it will increase her Total Benefit/ Total Satisfaction.

If MU / MB of 4th serving is negative: she will be worse off consuming 4th unit,  as it will reduce her total benefit/ satisfaction. If it's 0, she will be indifferent consuming 4th unit or not, as total benefit/ satisfaction will remain same.