Question

Soo Jin shares a one-bedroom apartment with her classmate. Her share of the rent is $700 per month. She is considering moving to a studio apartment which she will not have to share with anyone. The studio apartment rents for $950 per month. Recently, you ran into Soo Jin on campus and she tells you that she has moved into the studio apartment. Soo Jin is as rational as any other person. As an economics major, you rightly conclude that

Answer 1

Soo Jin has moved to the studio apartment since the additional benefits that she receives is more than the cost of $250 that she has to pay. In other words, the marginal benefit is greater than the marginal cost.