When purchasing autos and other durable goods, consumers tend to use discount rates that are inversely proportional to their income, so the discount rates are lower for consumers with higher income. The key reason for this behavior is that:
A) lower income consumers face very strict cash constraints, and they expect these problems to get worse in the future.
B) high income consumers tend to have lower opportunity costs for money.
C) high income consumers tend to make long-term investments (e.g., 30-year bonds), which always pay lower interest rates than short-term investments.
D) none of the above
B
You might also like to view...
The Ricardian model of international trade demonstrates that trade can be mutually beneficial. Why, then, do governments restrict imports of some goods?
A) Trade can have significant harmful effects on some segments of a country's economy. B) The Ricardian model is often incorrect in its prediction that trade can be mutually beneficial. C) Import restrictions are the result of trade wars between hostile countries. D) Imports are only restricted when foreign-made goods do not meet domestic standards of quality. E) Restrictions on imports can have significant beneficial effects on domestic consumers.
The law of diminishing marginal returns says that as additional units of a variable input are added to
a. fixed amounts of other inputs, total output will eventually remain constant b. varying amounts of other inputs, total output will eventually decline c. fixed amounts of other inputs, the resulting increases in total output will eventually become smaller d. varying amount of other inputs, the resulting increases in total output will eventually become smaller e. a declining amount of output, technology will eventually deteriorate