Question

Patrick has chosen to double major in finance and microbiology and studies 14 hours a day as a result. To make it through his studies, Patrick relies on GreenCow energy drinks. Consider the chart of his marginal costs (MC) and marginal benefits (MB) from consuming GreenCow. What is the optimal quantity of GreenCow drinks for Patrick?

Answer 1

Solution and Explanation:

1st question:

The optimal quantity could be found where MB = MC

Where, MB = marginal benefit, and MC = Marginal cost

The corresponding point on the horizontal axis would be the optimal quantity.

Answer: 5 cans

2nd question:

The marginal benefit (MB) from additional can is no longer worth the cost. Suppose he consumes 6 numbers of cans. At this level MC > MB, and this is not worthwhile because the cost becomes higher than benefits.

Answer: The exra energy benefits Patrick gets from another can are no longer worth the cost.