Scenario 5.1 The Demand for Noodles Is Given by the Following Equation

question 108

Multiple Choice

Scenario 5.1
The demand for noodles is given by the following equation: Q = 20 - 4P + 0.2I - 2P_x. Assume that P = $8, I = 200, and P_x = $10.
-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 rather than on utility maximization.

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Definitions:

Merchandiser

A business or person that sells goods to consumers, typically involved in purchasing, displaying, and selling of products.

Inventory

The total amount of goods and materials held by a company for the purpose of resale or manufacturing.

Gross Profit

The difference between revenue and the cost of goods sold, indicating the efficiency of core operations.

Sales

The total revenue earned by a company from selling goods or services over a specific period of time.