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 6- MB 5- marginal costs (MC) and marginal benefits (MB) from consuming GreenCow. 4 What is the optimal quantity of GreenCow drinks for Patrick? What occurs if Patrick consumes more than the optimal quantity? A) Patrick will switch to another brand that sells a stronger energy drink. B) Patrick will begin to buy in bulk so that he can get a better deal on cases of GreenCow. C) Patrick will no longer be able to afford to buy GreenCow. D) The extra energy benefits Patrick gets from another can are no longer worth the cost. MB/MC (S)

Answer 1

D) The extra energy benefits Patrick gets from another can are no longer worth the cost. MB/MC (S)

Explanation:

The optimal quantity for Patrick to consume is 5 cans of GreenCow.

This is the quantity where MARGINAL BENEFIT EQUALS MARGINAL COST. For all quantities up to the 5th, the marginal benefit is higher than the marginal cost. This means that Patrick's net benefit is increasing, and consuming all units up to this point make him better off.

If Patrick were to consume any more than 5 cans of GreenCow, the cost of each additional can would be higher than the additional benefit (because the marginal cost curve is higher than the marginal benefit curve). Consuming any cans beyond the 5th, therefore, makes him worse off.