What were Patrick’s choices and what was the cost of each?
With limited resources of time and money, Patrick had two choices: line up at a test center for hours and have a free test or buy a test kit online for $20 and do the test at home.
The cost of each choice is an opportunity cost—the best alternative forgone. The opportunity cost of a free test is the best alternative use of the time spent in the waiting line. The opportunity cost of the $20-test kit is the other good or service that he would have bought with the $20.
Why did Patrick buy test kits from Joey?
Patrick bought test kits from Joey because that was a rational choice—the choice that achieved the greatest benefit over the cost. The benefit of a test minus the cost of waiting in line was smaller than the benefit of five kits minus the cost of forgoing $100-worth of another good or service.
Why did Patrick buy five test kits rather than four or six?
Patrick bought the number of test kits that achieved the greatest benefit over cost. To make his decision, he compared marginal benefit and marginal cost. His marginal benefit from a test kit decreases with each additional kit he buys. The marginal benefit of a fourth test kit exceeded its marginal cost. His marginal benefit from a fifth test kit equaled or exceeded its marginal cost. But his marginal benefit from a sixth test kit was less than its marginal cost. So, buying five test kits achieved the greatest benefit over cost.
Now take a short quiz to check that you understand what you just read.