Question

A college student decides to spend the afternoon watching three movies rented from red box. the cost of each movie is $1. the student was willing to pay $4 to rent each of the first two movies and $2 to rent the third movie. what was the marginal benefit received by the student when renting the 2nd movie?

Answer 1

The marginal benefit received by the student when he rent the 2nd movie is -$4. Marginal benefit is the maximum amount that the person is willing to pay to consume the goods or services. In this case, the college student already reaches his maximum satisfaction so that when he watched the third movie the satisfactory level will go down because he is already satisfied to the first two movies but he still watches the third movie.