In the tourist-trap model,a consumer might pay more than the marginal cost for a good sold in a competitive market because
A) the consumer is not free to search for lower prices.
B) souvenir stores are part of a nationwide cartel.
C) the cost of searching for a cheaper good is more than the markup over the marginal cost.
D) the difference in prices between stores will be smaller than the search cost.

Question

Quizplus · Accepted Answer

In the tourist-trap model, consumers may pay more than the marginal cost because the cost of searching for a cheaper price exceeds the potential savings from finding a lower price, making it rational to pay the higher price.

In the Tourist-Trap Model,a Consumer Might Pay More Than the Marginal