1 You are considering how much to study for your microeconom

1. You are considering how much to study for your microeconomics exam at the end of the week, but all you care about is your upcoming spring break trip to Florida. Fortunately, your parents have offered to contribute $4 toward the cost of your trip for every point you get on the exam. You estimate that with H hours of studying, your parents\' contribution (your total benefit from studying) will be B(H)-80H- a. What is the Marginal Benefit function of studying? b. You can also earn $10 per hour working at your pizza delivery job. Write a function describing your Total Costs as a function of H assuming the lost wages from delivering pizza are your only costs. c. What is the Marginal Cost of studying? d. What is the optimal amount of H, hours, you should study to maximize your Total Benefits

Solution

Question c). Solution :- C(H) = 10H [ C(H) denotes total cost function ]

MC = 10. (MC denotes Marginal cost function. It is the first derivative of total cost function).

Conclusion :- Marginal cost of studying = 10.

Question d). Solution :- Total benefits - Total costs = 0.

80H - H² - 10H = 0

70H - H² = 0

H² - 70H = 0

H(H - 70) = 0

Either H = 0 or H - 70 = 0

Either H = 0 or H = 70.

H can not be zero (0). Accordingly, The value of H would be 70.

Conclusion :- Optimal amount of hours (H) = 70.