1. Fundamentals of consumer choice Teresa spends a significant amount of time re

Question

1. Fundamentals of consumer choice Teresa spends a significant amount of time researching resorts for a long overdue vacation, paying special attention to resorts' chefs and food options. Which of the following best explains Teresa's behavior from an economic perspective?

A. Because this vacation is important to Teresa, as a rational consumer, she wants to make a well-informed choice.

B. Teresa behaves irrationally, refusing to make a decision with imperfect information.

C. Teresa's behavior is irrational because spending too much time researching the best option increases the cost of finding the best option. Teresa has always been fond of lobster. However, after having lobster every day for a week while on vacation, she grew tired of her favorite meal. How can economic theory help explain this change of heart?

A. As Teresa consumes more and more of her favorite meal, the marginal utility of additional servings of lobster declines.

B. Because of her limited income, Teresa realizes that she will be happier if she substitutes fish burgers for lobster.

C. Because lobster is very expensive, Teresa feels guilty about spending so much money on this item.

D. Teresa realizes that lobsters are an endangered species and decides that she should stop eating them.

Explanation / Answer

a) "A"

Because the vacation is important to her she is spending more time gathering information to make an informed decision.

b) "A"

After consuming more the marginal utility of lobster declined.

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