ose Consumer X chooses how many halfhours to spend haggling

ose Consumer X chooses how many half-hours to spend haggling by cost. How many half-hours will he choose to (b) (1 point) Supp comparing average benefit to average spend? Explain briefly (c) (1 point) What is the issue with Consumer X\'s choice as derived in question (b)? What is the optimal choice then? Explain using marginal benefit and marginal cost. . Consider a driver\'s decision regarding how fast to drive. In particular, suppose that for this B(x) = 75x-1.5x2 (a) (1.5 points) Now suppose the driver knows that potential fines from speeding increase driver, the benefit (in S\'s) of driving z miles per hour (mph) above the speed limit is at an increasing rate with each mph above the speed limit. Specifically for this driver, the cost (in S\'s) of speeding is given by By how much will this rational driver exceed the speed limit? Show your work.

Solution

The rational driver will maximize the net benefit (NB).

NB = B(x) –C(x)

NB = 75x – 1.5x2 –x2

NB = 75x – 2.5x2

Differentiate NB wrt x.

dNB/dx = 75 -5x = 0.

X =75/5 = 15. Therefore the rational driver will exceed the speed limit by 15 miles per hour only