Annie plans to buy a convertible this weekend. Her two favorite cars are the BMW Z3, which would giveher 150,000 utils of satisfaction, and the Mitsubishi Eclipse Spyder GS-T, which would give her only124,000 utils of satisfaction. The BMW Z3 that she wants sells for $37,220, while the Mitsubishi sells for$28,200. She can afford either car.
a. Which car will she buy in order to maximize her utility?
b. To what price will her second choice have to fall to get her to make it her first choice?

Question

Annie plans to buy a convertible this weekend. Her two favorite cars are the BMW Z3, which would giveher 150,000 utils of satisfaction, and the Mitsubishi Eclipse Spyder GS-T, which would give her only124,000 utils of satisfaction. The BMW Z3 that she wants sells for $37,220, while the Mitsubishi sells for$28,200. She can afford either car.
a. Which car will she buy in order to maximize her utility?
 b. To what price will her second choice have to fall to get her to make it her first choice?

Quizplus · Accepted Answer

The Answer of Annie plans to buy a convertible this weekend. Her two favorite cars are the BMW Z3, which would giveher 150,000 utils of satisfaction, and the Mitsubishi Eclipse Spyder GS-T, which would give her only124,000 utils of satisfaction. The BMW Z3 that she wants sells for $37,220, while the Mitsubishi sells for$28,200. She can afford either car.
a. Which car will she buy in order to maximize her utility?
 b. To what price will her second choice have to fall to get her to make it her first choice?

Annie Plans to Buy a Convertible This Weekend