Answer to Question #71829 in Microeconomics for ben

Question

Kevin has a lot of free time and he decides to pick up a new hobby. He has two options—he can take art classes or can sign up for French cooking classes. He estimates that the art classes would cost him $70, and would provide him with a benefit of $100. On the other hand, the cooking classes would cost him $120, but provide him benefits worth $160. Use cost-benefit analysis to arrive at the optimum choice for Kevin.

Answer 1

Kevin's optimal choice would depend on the net benefits of both options.
Net benefit of taking up art classes = $100 - $70 = $30
Net benefit of taking up cooking classes = $160 - $120 = $40
Therefore, given the costs and benefits involved,
Kevin should sign up for the French cooking classes rather than the art classes.