The expected marginal benefit to Todd from purchasing a new sport utility vehicle is $20,000, and the price of the new sport utility vehicle is $22,000. Given that Todd is a rational consumer, which of the following statements is true?
A)Todd will borrow $2,000 and purchase the new sport utility vehicle.
B)Todd will not purchase the new sport utility vehicle at this time.
C)If Todd does not purchase the new sport utility vehicle, his net loss will be $2,000.
D)Todd will purchase the sport utility vehicle when the marginal cost of doing so falls to $21,000.
E)Todd will buy the sport utility vehicle and rent it to other people.

Question

Quizplus · Accepted Answer

Todd is a rational consumer, which means that he will choose to buy the new sport utility vehicle only if the marginal benefit ($20,000) is greater or equal than the price ($22,000). In this case, the marginal benefit is less than the price, so Todd will not purchase the new sport utility vehicle at this time. Borrowing money (choice A) or buying and renting the vehicle (choice E) are not mentioned as options for Todd in the question, and there is no information to support choice C or D. Therefore, the best choice is B.

The Expected Marginal Benefit to Todd from Purchasing a New