Vinnie is looking for an apartment in Regina.In Regina,75% of the two-bedroom,one-bath apartments cost $800 a month and 25% cost $600.Vinnie would prefer to find an apartment that rents for $600.The marginal cost of looking at the first apartment is $15,the marginal cost of looking at the second apartment is $30,and so on.
-Refer to the information above.Suppose that Vinnie discovers that the marginal cost of looking at an extra apartment is $25,rather than $15.He will now look at a maximum of __________ apartments.

Question

Quizplus · Accepted Answer

Since Vinnie would prefer to find an apartment that rents for $600, he will only look at the 25% of the apartments that cost $600. The marginal cost of looking at each apartment increases from $15 to $25, which means Vinnie is willing to look at fewer apartments to keep his search costs down. To find the maximum number of apartments Vinnie will look at, we need to determine the point where his marginal benefit equals his marginal cost. Since the search costs increase by $10, Vinnie will look at two additional apartments: 
$600 apartment #1 = $15 MC
$600 apartment #2 = $25 MC
At this point, Vinnie's marginal cost exceeds his marginal benefit, so he will stop searching. Therefore, the maximum number of apartments Vinnie will look at is 2.

Vinnie Is Looking for an Apartment in Regina