Jason is faced with two options: A BMW costing $40,000 gives him an additional 800 units of utility, and a laser printer costing $1,000 gives him an additional 25 units of utility. Rational choice theory would predict that he would choose:
A) to purchase the BMW.
B) to purchase the laser printer.
C) it is impossible to choose because the goods have different prices.
D) it is impossible to choose because BMWs and laser printers are fundamentally different goods with different purposes.

Question

Quizplus · Accepted Answer

Rational choice theory suggests choosing the option with the highest utility per dollar spent. The BMW provides 20 units of utility per $1,000 (800/40), while the laser printer provides 25 units of utility per $1,000 (25/1). Therefore, the laser printer offers more utility per dollar.

Jason Is Faced with Two Options: a BMW Costing $40,000