One Reason That Consumers and Businesses Might Not Act Rationally

question 86

Multiple Choice

One reason that consumers and businesses might not act rationally is

• A)it is difficult to obtain enough information about the elasticities of demand and supply.
• B)they may not realize their actions are inconsistent with their goals.
• C)consumer tastes change constantly.
• D)they do not always value fairness when they make choices.

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Definitions:

Law of Increasing Opportunity Costs

States that as production of a product increases, the cost to produce an additional unit of that product also increases. This is due to resources typically not being equally efficient in producing every good.

Consumer Goods

Products that are purchased for consumption by the average consumer, typically divided into durable goods, nondurable goods, and services.

Capital Goods

Physical assets used in the production of goods and services, such as machinery, buildings, and equipment.

Production Possibilities Curve

A graphical representation that shows the maximum combination of two goods or services that can be produced with a given set of resources and technology.