Question

It is a hot day at the beach. Ice water costs $1 per bottle and this is your only option. Your marginal benefit for water follows the equation MB = $10 - $x.x is represents the number of bottles of ice water you have had. So, for example, the marginal benefit of the first bottle is $10 - $1 = $9. The MB of the 2nd bottle is $8 .. and so on.Assuming you are an economically rational consumer how many bottles of water will you buy?

Answer 1

9 bottles of water

Explanation:

Marginal benefit is a microeconomic concept that explains how much the consumer adds satisfaction to each unit consumed of a given product. Usually, the marginal benefit is decreasing, which makes logical sense, the more a customer consumes a particular good, the smaller the benefit of the next unit.

At first, the first bottle of water has a high benefit as mentioned in the exercise: 9

In the second, you are a little less thirsty, so the benefit will be 10 - 1x2 = $8

In the ninth bottle, you will have very little thirst and the benefit will be 10 - 1x9 = $1

In the tenth bottle there is no benefit, the consumer is indifferent. As a rational consumer, you will buy until the bottle is still usable, even if minimal, for 9 bottles when your benefit is $1.