This graph illustrates the marginal costs and marginal benefits of acquiring information before making a major purchase. Suppose the marginal cost and marginal benefit curves were MC₀ and MB₀ several decades ago. However, because information about this product is now available online, the:
A)optimal amount of information will decrease.
B)optimal amount of information will increase.
C)optimal amount of information will stay the same, but it will cost less to acquire.
D)demand for information will increase.

Question

This graph illustrates the marginal costs and marginal benefits of acquiring information before making a major purchase.  Suppose the marginal cost and marginal benefit curves were MC₀ and MB₀ several decades ago. However, because information about this product is now available online, the:
A)optimal amount of information will decrease. 
B)optimal amount of information will increase. 
C)optimal amount of information will stay the same, but it will cost less to acquire. 
D)demand for information will increase.

Quizplus · Accepted Answer

Being able to now acquire information at a lower cost online will shift MC curve to the right (for example, from MC₀ to MC₁), so that the optimal amount of information will increase.

This Graph Illustrates the Marginal Costs and Marginal Benefits of Acquiring