The Economics of Going Out to Dinner with Friends
a. Calculate Jia's costs associated with going out to dinner with her friend.
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b. Calculate Jia's benefits associated with going out to dinner with her friend.
SFinal answer:
Jia's costs of going out to dinner with her friend would be $48, while the benefits would be $55. Based on the comparison, she should not go out to dinner.
Explanation:
Jia's costs associated with going out to dinner with her friend include the cost of the meal ($40), the tip (20% of the meal cost), and the cost of transportation ($5 each way for the Uber). So her total costs would be $40 + (0.2 * $40) + ($5 * 2) = $48.
Jia's benefits associated with going out to dinner with her friend include the value of the meal to her ($25) and the value she places on spending time with her friend ($30). So her total benefits would be $25 + $30 = $55.
To determine whether she should go out to dinner, Jia should compare her costs to her benefits. Her costs ($48) are higher than her benefits ($55), so she should not go out to dinner with her friend.