When Attempting to Explain Why a Consumer Purchases a Ford

question 72

Multiple Choice

When attempting to explain why a consumer purchases a Ford automobile instead of a Honda automobile or a Compaq computer instead of an IBM computer,an economist would assert:

• A)that the consumer is making a decision based on what gives him maximum utility.
• B)that everyone knows Hondas are superior to Fords; the consumer cannot possibly be maximizing his utility.
• C)that everyone knows IBM computers are superior to Compaq computers; the consumer may be maximizing his utility at the margin,but is not maximizing total utility.
• D)that there is no standard explanation for consumer choices because consumers have varied tastes and preferences.
• E)that since rationality is bounded by lack of information,a consumer purchases goods based on convenience than on utility maximization.

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Definitions:

Current Ratio

A financial ratio indicating a firm's capacity to settle its short-term liabilities with assets that can be easily converted into cash within a year.

Total Current Assets

The total value of all assets that a company expects to convert into cash within one year, including cash, inventory, and accounts receivable.

Total Current Liabilities

The sum of all liabilities of a company that are due within one year, including accounts payable, short-term loans, and other short-term financial obligations.

Assets

Resources owned by a person or business that have economic value and can provide future benefits.