You're Travelling in Japan and Are Thinking About Buying a New

question 78

Multiple Choice

You're travelling in Japan and are thinking about buying a new kimono.You've decided you'd be willing to pay $175 for a new kimono, but kimonos in Japan are all priced in yen.If the kimono you're looking at costs 14,000 yen, under which of the following exchange rates would you be willing to purchase the kimono? (Assume no taxes or duties are associated with the purchase.)

• A)24.5 yen per Canadian dollar
• B)45 yen per Canadian dollar
• C)65 yen per Canadian dollar
• D)80 yen per Canadian dollar
• E)You would purchase the new kimono at any of the above exchange rates.

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Definitions:

Marginal Utility

The variation in pleasure or usefulness a consumer feels from using one more unit of a product or service.

Diminishing Marginal Utility

The principle that as a consumer consumes more of a good or service, the additional satisfaction gained from consuming an additional unit decreases.

Inferior Good

A type of good for which demand decreases as the income of consumers increases, opposite to what is observed with normal goods.

Diminishing Marginal Utility

The principle that as a person consumes more of a good, the satisfaction (utility) gained from consuming an additional unit decreases.