Question

Pat can either drive to work, which takes half an hour and uses $1.50 worth of gas, or take the bus, which takes an hour and costs $1.00. How should Pat get to work?

Answer 1

pat should drive if saving half an hour is worth $0.50 or more

Step-by-step explanation:

Marginal cost is the additional cost generated by producing an additional unit of output.

Marginal cost of taking the bus = 1 / 2 = 0.50

Marginal utility is the additional utility derived from consuming one more unit of a good

Marginal utility per good = marginal utility / price of the good

Pat should take the action that would yield him the highest utility given the marginal cost

So,pat should drive if saving half an hour is worth $0.50 or more