Assume there are two individuals (person A and person B) who have the same prefe
ID: 1093400 • Letter: A
Question
Assume there are two individuals (person A and person B) who have the same preference for Kramer IMAX Theater, i.e. their marginal benefits from watching movies are exactly the same and the more they watch the lower the satisfaction (benefit) they get from watching each additional movie. Person A does not have an annual membership to Science Centre and has to pay $9 per movie. Person B purchased the annual membership for $42 and therefore pays $7.20 per movie. Graphically and verbally explain which individual will watch more movies at the IMAX Theater throughout the year.
Explanation / Answer
Person B will watch more movies since his marginal cost per movie is lower, and thus he will get to the point where marginal benefit is less than marginal cost more slowly.