While Waiting in Line to Buy Two Tacos at 80

question 96

Multiple Choice

While waiting in line to buy two tacos at 80 cents each and a medium drink for 90 cents, Jordan notices that the restaurant has a value meal containing three tacos and a medium drink all for $3. Jordan should purchase the value meal if

• A) his marginal cost exceeds his marginal benefit.
• B) his marginal benefit of the third taco is greater than 50 cents.
• C) his value of the third taco is less than 50 cents.
• D) he has $3 in his wallet.

Understand the effects of inflation on the real interest rate and its impact on consumption decisions.

Develop an understanding of arbitrage opportunities in well-functioning markets.

Analyze the impact of changes in economic conditions on asset prices.

Evaluate investment opportunities in perpetuities and annuities.

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Definitions:

Percent Increase

The ratio, expressed as a percentage, that represents the extent of growth of a quantity from its original value.

Sell Order

An instruction to a broker to sell a specified quantity of a security at the current market price or at a specific price.

Portfolio Value

The total worth of all the financial assets held by an individual or institution.

Heart Attack

A medical emergency characterized by the death of heart muscle due to the loss of blood supply.