Mr Jones Always Buys Gasoline at the Corner Station with His

question 140

Multiple Choice

Mr. Jones always buys gasoline at the corner station with his credit card. Now a new station (that does not accept credit cards) is built on the other corner and offers the same quality of gasoline for $.05 less per gallon. Is Jones irrational if he continues to buy gasoline at the old station?

• A) Yes; such action would clearly violate the law of demand. If the price is lower across the street, Jones should go there.
• B) Not necessarily; he may think the ease and convenience of using the credit card is worth the extra cost.
• C) Yes; his actions imply that the law of diminishing returns does not apply to gasoline.
• D) Not enough information is given to determine if his actions are rational.

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Definitions:

Purpose

The reason for which something is done or created, or for which something exists.

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