The figure given below shows the marginal cost and the marginal benefit of information curves. In the figure given below, if a consumer gathers an amount of information equal to I₂, it implies that:
Figure 14.2

Question

Quizplus · Accepted Answer

The optimal amount of search occurs where the marginal benefit of information equals the marginal cost of acquiring it. In this case, that occurs at point U1 on the graph, where IS1 intersects MB and MC. Therefore, if a consumer gathers an amount of information equal to I₂, it means she has made the optimal search.

The Figure Given Below Shows the Marginal Cost and the Marginal