Suppose that Alexa’s school charges a fixed fee of $70,000 for four years of schooling. If Alexa drops out before she finishes those four years, she still has to pay the $70,000. Alexa’s total cost for different years of schooling is now given by the data in the accompanying table. Assume that Alexa’s total benefit and marginal benefit remain as reported in Table 9-5.

Use this information to calculate (i) Alexa’s new marginal cost,

(ii) her new profit, and (iii) her new optimal years of schooling.

What kind of marginal cost does Alexa now have — constant, increasing, or decreasing?

Transcribed Image Text:

Quantity of schooling (years) 0 1 Total cost $0 90,000 2 120,000 3 170,000