John enjoys boxing and engages a personal trainer to improve his health and fitness. As part of a special offer, John pays $0 for the first session and $30 for each subsequent session. John gains $200 of benefit from attending 6 sessions and $250 of benefit from attending 7 sessions. Which of the following statement(s) are true: A.John should attend the seventh session because the marginal benefit is greater than the marginal cost. B.The marginal benefit of attending the seventh session is $40. C.John should not attend the seventh session because the marginal benefit is less than the marginal cost. D.The marginal cost of attending the seventh session is $50.

• John should attend the seventh session because the marginal benefit is greater than the marginal cost

B.The marginal benefit of attending the seventh session is $40.

Explanation:

Marginal product (MP) - marginal cost (MCMC) = Marginal profit (MP)

Let us take marginal product as revenue earned to produce one additional unit which in our scenario, is the benefit earned by attending the 7th session

Marginal cost is the cost of producing an additional unit and in this case, the cost of attending the 7th session

Cost of attending 7 sessions

7*30 = $210

Benefit of attending 7 sessions

$250

Marginal profit = $250 - $210 = $40

Thus, marginal benefit of attending 7th session is $40

The marginal benefit of 7th session is $40 while marginal cost of 7th session is $30 that is paid for each session. Since marginal benefit is greater, that is why John will attend the 7th session as a rational person