Question

Consider Ron’s demand for after school care for his children. The marginal benefit Ron receives for every hour of childcare is provided in the accompanying table.

After school | Marginal childcare benefit ||(hours per day)||($ per hour) 1 $32 2 $30 3 $20 4. $14

a. Utilizing the information in the table, move the points in the first graph to plot Ron's marginal benefit curve, and move the points in the second graph to plot Ron's demand curve.

b. If an hour of childcare costs $24, how many hours will Ron purchase each day? Assume Ron can only purchase care in one-hour increments (no partial hours).

c. If an hour of childcare costs $18, how many hours will Ron purchase each day? Assume Ron can only purchase care in one-hour increments (no partial hours).

d. Ron's marginal benefit curve is (the same as/ different than)  his demand curve. (pick one)

Answer 1

a.

EMB-40- 35! 30 25- -15- -10 MB -2 -1 0 1 2 3 4 6 7 8 9 After school childcare

35- 30 25 20 -15 -10 Demand -2 -1 0 1 2 3 3 4 4 5 5 6 7 8 9 After school childcare

b. childcare cost= $24

Ron will purchase childcare hours only till MB≥MC or MB≥24

so, 2 hours per day childcare will be purchased.

c. Childcare cost=$18

Ron will purchase childcare hours only till MB ≥MC or MB≥18

so, 3 hours per day childcare will be purchased

d. Marginal benefit curve is the same as his demand curve.