A Consumer Who Buys a Product Without Having Compared Prices

question 9

Multiple Choice

A consumer who buys a product without having compared prices at nearby stores

• A)violates the assumption of rationality underlying consumer theory.
• B)is irrational because she could save money by shopping around.
• C)is rational because it would be costly to find out how much the product would cost elsewhere.
• D)is rationally ignorant if she expects the costs of doing so to be greater than possible savings.

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Definitions:

Marginal Rate of Substitution

The ratio at which a consumer can exchange quantities of one good for another while preserving the same degree of contentment.

Pareto Optimal

Pareto optimal is a state of allocation of resources in which it is impossible to make any one individual better off without making at least one individual worse off.

Smelted

The process of extracting a metal from its ore by heating and melting, often involving a chemical reduction reaction.

Carload

A shipping term used to indicate the minimum quantity of cargo necessary for goods to be shipped at a carload rate, typically pertaining to rail transport.