Question

The price of each ride at the fair is $7. Your benefit associated with each ride decreases with each ride because you start to get dizzy. How many rides should you go on if your marginal benefit for each ride is as follows- first ride: $25, second ride: $18, third ride: $11, fourth ride: $4, fifth ride: $0?

Answer 1

3 rides.

Explanation:

The correct answer is 3 rides as in the first ride your benefit is $25 while you will pay only $7.

For the second ride your additional benefit is $18 and again you will pay only the additional $7.

Likewise, for the third, the benefit $11 and the cost $7.

You will not consider the fourth ride because the additional benefit is only $4 as compared to the cost, which is $7.

MB MC

25 7

18 7

11 7

4 > 7