Lori plans to buy a convertible this weekend. Her two favorite cars are the BMW, which would give her 160,000 utils of satisfaction, and the Mitsubishi Eclipse Spyder, which would give her only 124,000 utils of satisfaction. The BMW that she wants sells for $37,220, while the Mitsubishi sells for $28,200 . She can afford either car
a. Which car will she buy in order to maximize her utility?
b. To what price will her second choice have to fall to get her to make her first choice?
a. She will buy the Mitsubishi, because its marginal-utility-to-price ratio, 4.397, is higher than the marginal-utility-price ratio for the BMW (4.03).
b. If the price of the BMW falls to $34,114.17 = 160,000 / 4.397, she will be indifferent between the two. If the price of the BMW falls to $34,114.16, she will buy the BMW.
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Gross Domestic Product is the
a. least inclusive aggregate used to measure the economy. b. total of goods and services desired by consumers. c. most comprehensive measure of total output in the United States. d. most accurate measure of the trade balance of the United States.
When the Hometown football team is winning by a lot of points after halftime, they often play their second and third team players. One of the coaches notices that when the third team plays that Oklahoma wins by a bigger margin than when just the first team plays. He recommends that the third team see more playing time as a result. What is wrong with his way of thinking?
a. association is not causation b. it is a violation of ceteris paribus c. the fallacy of composition d. good intentions do not guarantee desirable outcomes