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 occurs at the point where marginal benefit equals marginal cost. In this exhibit, that point occurs where the cost of increasing search by one unit (from S1 to S2) equals the additional benefit of finding an extra unit (from U1 to U2), which is at point B12. Beyond that point, the marginal cost of search (the additional cost of increasing search from S2 to S3) exceeds the marginal benefit (the expected additional benefit of finding another unit of the product), so the optimal level of search is at point B12, which corresponds to search level I₂.

Exhibit 14-2 -In Exhibit 14-2, the Optimal Level of Search Is