Question

A college student plans to spend the Friday evening watching movies rented from Red Box. The price of each movie is $1. Suppose the student receives $3 worth of benefits from the first movie, $2 worth of benefits from the second movie, $1 worth of benefits from the third movie and $0 worth of benefits from the fourth movie. According to marginal principles, how many movies will provide the student with the most satisfaction?

Answer 1

Answer:

3 Movies

Explanation:

The explanation is that when the marginal utility equal the marginal cost you get the maximum of benefit of the transaction as you can see the by every movie that they buy they receive a benefit greater than the price until the benefit and the price is the same $1 it is the point where the students get the most satisfaction of their purchases. In this case with a total number of 3 movies that cost $3 they receive $6 of satisfaction.