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Question: There are 50 episodes of a new TV show on Netflix that you want to watch before they expire at the end of next week. You are trying to decide how many episodes to watch this week and how many to watch next week. Your weekly demand for episodes is P = 100 - Q and the marginal cost of watching an episode is 10. Your weekly discount rate is 10%.
a. How many episodes should you watch this week? How many should you watch next week?
b. What is your net benefit of the marginal episode this week? What is your net benefit of the marginal episode next week? How are these two values related?
c. If your discount rate was 0% how many episodes would you watch this week? How many would you watch next week?
d. You have an exam this week that raises the marginal cost of watching an episode to 20 (the marginal cost next week stays at 10). How many episodes should you watch this week? How many should you watch next week?
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