Why Is a Typical Person Likely to Gather More Information

question 233

Multiple Choice

Why is a typical person likely to gather more information when buying a new car than when voting for a member of Congress?

• A)because a person's preferences are more likely to be met with little effort in the political sphere but this is not the case when buying a car in the private marketplace
• B)because it is less costly to acquire information about consumer items than it is about political candidates
• C)because buying a new car affects a person more immediately and personally compared to voting for a member of Congress; in the latter, a person's vote is only one of many voters and therefore, not likely to have a large impact on the outcome
• D)because the effects of buying a car are long term while a member of Congress has a relatively short tenure

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Definitions:

Margin of Safety

The difference between actual sales and the break-even point, indicating the amount by which sales can drop before a business incurs a loss.

Degree of Operating Leverage

Degree of operating leverage measures the sensitivity of a company's operating income to a change in sales volume, indicating the impact on profits from sales fluctuations.

Contribution Format Income Statement

An income statement format that separates variable costs from fixed costs, highlighting the contribution margin.

Unit Sales

The total number of individual items or units that a company sells during a certain period.