Question

“If the cost of repairing your car goes up, you should do less of it.” Is this statement correct? If you think the answer is yes, explain why. If you think the answer is no, give an example in which the best choice is higher when costs are higher.

電器3. MB MC Hours (H) Figure 1: Marginal Benefit versus Marginal Cost

Answer 1

True, as costs of repairing the car goes up, one should use less of it. This is because in this case, the car and the utility that it provides is considered to be a normal good. Also, there are certain constraints like financial constraints that are associated with repairing the car that is associated with every time the car is repaired. On the other hand, if there were no financial constraints, it the usage of car would not have been affected by increasing repair costs of cars. Thus, when there are unlimited resources available in an economy, then higher costs could lead to higher benefits at times (an Iphone provides more utility than a normal phone).