Vivaan, a Musician, Frequently Plays at Large Parties and Nightclubs

question 86

Multiple Choice

Vivaan, a musician, frequently plays at large parties and nightclubs. Vivaan has musical equipment worth $8,000, and he takes precautions to prevent theft. The marginal benefit of these precautions is given by MB = 60 - 3A, where A is the number of precautions Vivaan takes to reduce theft. The marginal cost of preventing theft (i.e., the time, energy, and effort expended) is given by MC = 2A. What is Vivaan's optimal level of precautions?

• A) 20
• B) 12
• C) 30
• D) 60

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Definitions:

Income Elasticity

Income elasticity measures how the demand for a good or service changes in response to changes in consumer income.

Marginal Utility

The extra pleasure or benefit gained by a consumer from consuming an additional unit of a product or service.

Utility Function

A mathematical representation of how consumers rank different bundles or combinations of goods according to their level of satisfaction.

Partial Derivative

The derivative of a function of multiple variables with respect to one variable, holding the others constant.