Question

Your instructor is walking down the street idly wondering whether or not she will spend her old age living on the streets in a cardboard box. Billionaire Elon Musk is walking along the opposite side of the street, on his way to a business meeting. A couple of $20 bills fly into the street from a passing car which continues speeding away.
Which of the two--Musk or your instructor--is most likely to sprint into traffic to try and retrieve the bills? Explain in terms of the concepts presented so far. (There may be more than one.)

Answer 1

The instructor is most likely to sprint into the traffic to try and retrieve the bill. We can infer it from the relative marginal utility for the bill compared to the marginal cost. We can assume that the instructor's cost of hoigo for the bill is 0, while it is higher for Elon Musk as he is going for a meeting and might be late if he tries to go for the bill. His time cost might be higher. The benefit of the bill is also higher for the instructor as he is already worried about his finances after the retirement. While Elon Musk is a billionaire so $20 might not be of much value to him. So if we compare the relative costs and benefits, we clealcl know who will go for the bill