Exhibit 14-2 In Exhibit 14-2, the optimal level of search is

Question

Exhibit 14-2  In Exhibit 14-2, the optimal level of search is

Quizplus · Accepted Answer

The optimal level of search is where the marginal cost of search equals the marginal benefit of search. In the exhibit, the marginal cost of search increases as the number of search trials increases, while the marginal benefit of search decreases as the number of search trials increases due to the decreasing probability of finding a better option. Therefore, at the point where the marginal cost and benefit intersect, the optimal level of search is achieved. This intersection occurs at I₂.

Exhibit 14-2 in Exhibit 14-2, the Optimal Level of Search