A college student decides to spend his afternoon watching three movies rented from Redbox. The cost of each movie is $1. The student was willing to pay $4 to rent each of the first two movies and $2 to rent the third movie. What was the marginal benefit received by the student when renting the third movie?

Question

Quizplus · Accepted Answer

The marginal benefit received by the student when renting the third movie is the additional satisfaction he gets from watching that movie. Since the student was willing to pay $2 for the third movie, the marginal benefit is equal to $2. Therefore, the student should rent the third movie as it provides a marginal benefit of $2 which is higher than the marginal cost of $1.

A College Student Decides to Spend His Afternoon Watching Three