Which of the following scenarios describes an action that is not rational from a

Question

Which of the following scenarios describes an action that is not rational from an economic point of view?

A. Emily chooses to attend a social event on Tuesday night instead of studying even though she has an important exam on Wednesday morning.

B. After drinking one martini (shaken, not stirred), James buys and drinks a second martini even though the marginal benefit of the second martini is lower than the marginal benefit of the first.

C. Eric buys a replacement ticket to the basketball game after he realizes that he accidentally left his original ticket at home.

D. US Airways sells a last minute ticket to Don for $50 even though its average cost per passenger is $250.

E. None of the above

Explanation / Answer

Marginal benefit of drinks should be a decreasing function of each additional drink so that option B is rational. option B is also correct because there are vacant seats that should be filled at whatever price possible.

However option C is not correct because when original ticket is left accidentally at home it becomes the sunk cost. Purchasing a replacement ticket is not economically rational because marginal cost will exceed marginal benefit.

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