Question

Michael Scofield, a student at Minnesota State University, is preparing for midterm exams and has decided to devote five hours to the study of managerial economics and finance. Scofield's goal is to maximize the average grade earned in the two courses, and must decide how much time to spend on each exam. Scofield realizes that maximizing the average grade in the two courses is equivalent to maximizing the sum of the grades. According to Scofield's best estimates, the grades achieved will vary according to the schedule shown below. Managerial Economics Finance Hours of Study Grade Hours of Study Grade 0 25 0 50 1 45 1 62 2 65 2 72 3 75 3 81 4 82 4 88 5 88 5 93 A. How much time should Scofield spend studying each subject? B. In addition to managerial economics and finance, Scofield is also taking a marketing course. Scofield estimates that each hour spent studying marketing will result in an eight point increase on the marketing examination score. Scofield has tentatively decided to spend three hours preparing for the marketing exam. Is Scofield's attempt to maximize the average grade in all three courses with three hours devoted to marketing and five hours devoted to managerial economics and finance (allocated as in part A) an optimal decision? Why or why not?

Answer 1

A Scofield should devote 5 hours to both managerial economics and finance as by studying for 5 hours he can get the best grades out of all others. But his study is effective only for first 3 hrs but still his grades are increasing even though at a diminishing rate.For more details look at the attached image.

B his decision of studying for 3 hours the marketing and for 5 hrs economics finance is not optimal as increase in production per hr is consistently decreasing in both economics and finance whereas it remains constant in marketing, hence scofield should study for 3hrs for each economics and finance and study for 5hrs for marketing for optimal decision or he should study 3 hrs for economics and 2 hrs for finance and 5hrs for marketing.