Alex,a risk-neutral woman,is looking for an apartment.The distribution of apartments is as follows: 70% rent for $700 per month,20% rent for $600 per month,and 10% rent for $500 per month.All else constant,Alex would prefer an apartment that rents for $500.Alex's first search costs $10,and her cost of searching subsequently rises by $10 with each search.
-Refer to the information above.Suppose the cost of searching for Alex changes from $10 per search to $20 per search.Her optimal number of searches now is

Question

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With a higher search cost of $20, Alex should search until the expected benefit of finding a cheaper apartment is less than or equal to the cost of searching. The expected savings from searching must be compared to the increasing search costs. After 2 searches, the cost of searching ($40) outweighs the expected savings from finding a cheaper apartment.

Alex,a Risk-Neutral Woman,is Looking for an Apartment