QUESTION 2 When attempting to explain why a consumer purchases a Ford automobile
ID: 1193068 • Letter: Q
Question
QUESTION 2
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:
that there is no standard explanation for consumer choices because consumers have varied tastes and preferences.
that everyone knows Hondas are superior to Fords; the consumer cannot possibly be maximizing his utility.
that the consumer is making a decision based on what gives him maximum utility.
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.
that since rationality is bounded by lack of information, a consumer purchases goods based on convenience rather than on utility maximization
a.that there is no standard explanation for consumer choices because consumers have varied tastes and preferences.
b.that everyone knows Hondas are superior to Fords; the consumer cannot possibly be maximizing his utility.
c.that the consumer is making a decision based on what gives him maximum utility.
d.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.
e.that since rationality is bounded by lack of information, a consumer purchases goods based on convenience rather than on utility maximization
Explanation / Answer
Answer: Consumer is regarded as rational consumer and it is assumed that he seeks to maximize his utility or achieving the highest maximum utility. He will look for the product which give him maximum utility. Hence correct option is (A)