Question

Question 12 (1 point) Karen is planning her wedding and needs to rent tents for an outdoor reception. The middle columa in the follewing table reflects Karen's total benefits, or her total willingness to pay for tent rentals. The third colamn shows the total cost associated with renting from a local tent company Total Number of Tents Total Benefht $1,800 3,300 $4,500 5,400 $ 6,000 $ 6,400 Total Cost $ 1,400 $2,800 4,200 $ 5,600 $7,000 $ 8,400 How many semls should Karen rent MacBook Ai 30 oo pa 3 4. 2

Answer 1

Karen will rent that many tents where Marginal Benefit will be equal to Marginal cost.

Given,

No. Of tents	Total Benefit	Marginal Benefit	Total Cost	Marginal Cost
1	$ 1,800	-	$ 1,400	-
2	3,300	$ 1,500	2,800	$ 1,400
3	4,500	1,200	4,200	1,400
4	5,400	900	5,600	1,400
5	6,000	600	7,000	1,400
6	6,400	400	8,400	1,400

As we can see for 2 units of tent her Marginal benefit is $ 1,500 and Marginal cost is $ 1,400. While for 3rd unit onwards the marginal benefit is less than Marginal cost.

Hence, she must rent 2 tents.

Number of tents rented = 2

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