The expected marginal benefit to you from purchasing a new sport utility vehicle is $20,000. The price of the new sport utility vehicle is $22,000.
A)If you are acting rationally, you will borrow $2,000 and purchase a new sport utility vehicle.
B)You will not purchase the new sport utility vehicle at this time if you are acting rationally.
C)If you do not purchase the new sport utility vehicle, your net loss will be $2,000.
D)If you are acting rationally, you will purchase sport utility vehicles until the marginal cost of doing so falls to $20,000.

Question

The expected marginal benefit to you from purchasing a new sport utility vehicle is $20,000. The price of the new sport utility vehicle is $22,000.
A)​If you are acting rationally, you will borrow $2,000 and purchase a new sport utility vehicle.
B)​You will not purchase the new sport utility vehicle at this time if you are acting rationally.
C)​If you do not purchase the new sport utility vehicle, your net loss will be $2,000.
D)​If you are acting rationally, you will purchase sport utility vehicles until the marginal cost of doing so falls to $20,000.

Quizplus · Accepted Answer

The expected marginal benefit is $20,000, but the price of the new sport utility vehicle is $22,000. Therefore, the marginal cost of purchasing the vehicle is greater than the expected marginal benefit, resulting in a negative net gain. If the individual is acting rationally, they would not purchase the vehicle.

The Expected Marginal Benefit to You from Purchasing a New