A newly wedded couple is in the process of making fertility decisions. The table shown below illustrates
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Question:
A newly wedded couple is in the process of making fertility decisions. The table shown below illustrates the costs and benefits of different numbers of children.
Number of children | Total benefit | Additional cost |
1 | 600 | 120 |
2 | 780 | 120 |
3 | 901 | 120 |
4 | 975 | 120 |
5 | 1040 | 120 |
6 | 1070 | 120 |
7 | 1080 | 120 |
8 | 1080 | 120 |
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a) What is the optimal number of children that they should have?
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b) Suppose the couple could convince one of their parents to help in taking care of their children without having to pay for their services. Assume that this would lower their total cost of raising children by 40%. How many children will the couple have?
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c) Discuss the economic significance of your finding in part (b).
Related Book For
Business Statistics Communicating With Numbers
ISBN: 9780078020551
2nd Edition
Authors: Sanjiv Jaggia, Alison Kelly
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