Fiona shares an office with her ex-husband.Her share of the rent and utilities are $625 per month.She is considering moving to a home office which she will not have to share with anyone.The home office will not cost her anything as far as extra rent or utilities.Recently,you ran into Fiona at the gym and she tells you that she has moved into her home office.Fiona is as rational as any other person.As an economics major,you rightly conclude that
A)Fiona did not have a choice; her ex-husband was a jerk.
B)Fiona figures that the additional benefit of having her own office (as opposed to sharing)is at least $625.
C)Fiona figures that the benefit of having her own office (as opposed to sharing)is zero,since she is no longer paying rent and utilities.
D)The cost of having one's own space outweighs the benefits.

Question

Quizplus · Accepted Answer

Fiona is a rational person and as an economics major, she would weigh the costs and benefits of moving to her own home office. Since she is not paying any extra rent or utilities, the only cost is the potential loss of benefits from sharing an office (such as social interaction, splitting office supplies, etc.). Therefore, if Fiona has decided to move to her own office, it must be because she believes the additional benefits of having her own space are worth at least $625 per month.

Fiona Shares an Office with Her Ex-Husband