A college student decides to spend the afternoon watching three movies rented from Red Box.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 2^nd movie?

Question

Quizplus · Accepted Answer

The marginal benefit of watching the second movie after the first two is $2 since the student was willing to pay $4 for the first two movies combined. The marginal benefit of watching the third movie after the first two is also $2 since the student was willing to pay $2 for it specifically. Therefore, the total marginal benefit of watching the third movie is $4 ($2 for the second and $2 for the third). Since each movie costs $1, the total cost of renting all three movies is $3. Therefore, the marginal benefit received by the student when renting the third movie is $1 (=$4-$3) which is the answer.

A College Student Decides to Spend the Afternoon Watching Three