Question

4. Use the economic concepts of marginal benefits and marginal costs in your analyses of the scenarios below.

Several months ago, Kathy purchased a non-refundable plane ticket to travel to New York. Just a few days before her trip, Kathy learns that her best friend Monique will have an art show in Los Angeles while she is away. When Kathy learned this, she said, “If I had known about Monique’s art show, I would not have booked my trip.” Kathy now has to decide whether to make her trip or attend the art show.

a. (8 points) True or false (and why?): If Kathy is a rational economic decision-maker, her statement above implies that she will choose to attend the art show.

b. (8 points) Suppose now that Kathy’s plane ticket is fully refundable. What does Kathy’s statement above imply will be her optimal choice? Provide reasons for your answer.

Answer 1

8(a)- True she will never try to wasted her money cause it leads to fall in money in her life because tickets is not refundable she if she cancelled then he have to book it again

8(b)- If tickets is Fully refundable then he may cancel that tickets because he want to explore more with her friend. But she can also not cancel the ticket because she will have to book tickets again and 7 month ago tickets price will be less and now it will be costly and living more there leads to shortage in monkey so she have better option to go for economic point of view.