Microeconomics
2nd Edition
ISBN: 9780073375854
Author: B. Douglas Bernheim, Michael Whinston
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Chapter 3, Problem 7P
To determine
Calculate the hours the student spent studying for exam.
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Explain how studying for an exam is subject to the law of diminishing marginal productivity.
The law of diminishing marginal productivity implies that the optimal amount of studying is however many hours will lead to your highest possible score. After this point, your performance falls and you should not study any more.
Assuming you organize your studying reasonably, you will focus on the parts of the text that are most likely to show up on the exam and most likely to raise your grade. As you study less relevant material, your additional time spent studying will yield fewer additional points on the exam. At some point, additional studying can have a negative return.
The law of diminishing marginal productivity pertains to studying in a group only. If you study with one or two people, your grade will likely improve because they can teach you information you don’t know. However, at some point, as you add another person, the grades for everyone decline.
The more and…
A student has a part-time job in a restaurant. For this she is paid $8 per hour. Her utility function for earning $I and spending S hours studying is U(I,S) = I^1/4 S^3/4 (The utility function is a measure of the `usefulness' or `worth' to the student of a certain combination of money and study time). The total amount of time she spends each week working in the restaurant and studying is 100 hours. How should she divide up her time in order to maximise her utility?
Suppose that before you began your college application process, you were offered a job to work as a floor-trainer at a local climbing gym, accompanied by a yearly salary of $30,000 (after taxes). Assume however that you decided to turn down this offer and instead attend a year of college. The total monetary cost of the year of college, including tuition, fees, and room and board expenses, is $42,000.
You likely chose to attend college because
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