Essay question #1, Midterm #1zA) Imagine that Mandy is now doing shopping with her boyfriend in a department store. She is deciding how many cosmetic products she should purchase to maximize her beautifulness in a dancing party tonight. The following list summarizes her total benefits and costs for the number of cosmetic product(s) she purchases.1604358140430712042061004005803604603003402202201201000Total cost($)Total benefit ($)Unit(s) of cosmeticproduct purchased
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Solution to Essay question #1 (1)zBased on the above table, how many unit(s) of cosmetic product should Mandy purchase? (5 marks)zIt seems logical to find a specific unit of cosmetic products purchased where the difference between total benefit and total cost is the greatestzIf this is true, the optimal unit of cosmetic products will be either 5 or 6 unitszHowever, as we have discussed before. In Economics, we look at marginal values to decide whether to pursue for an actionzCost-benefit principlezWe pursue for a next unit of action if and only if the (marginal) benefit is greater than the (marginal) cost