1) Yakov spends a significant amount of time researching resorts for a long over
ID: 1107465 • Letter: 1
Question
1) Yakov spends a significant amount of time researching resorts for a long overdue vacation, paying special attention to resorts' chefs and food options. Which of the following best explains Yakov's behavior from an economic perspective?
a- Yakov behaves irrationally, refusing to make a decision with imperfect information.
b- Yakov's behavior is irrational because spending too much time researching the best option increases the cost of finding the best option.
c- Because this vacation is important to Yakov, as a rational consumer, he wants to make a well-informed choice.
2) Yakov has always been fond of tuna sushi. However, after having tuna sushi every day for a week while on vacation, he grew tired of his favorite meal. How can economic theory help explain this change of heart?
a- Because of his limited income, Yakov realizes that he will be happier if he substitutes California roll for tuna sushi.
b- As Yakov consumes more and more of his favorite meal, the marginal utility of additional servings of tuna sushi declines.
c- Yakov realizes that tuna fish are an endangered species and decides that he should stop eating them.
d- Because tuna sushi is very expensive, Yakov feels guilty about spending so much money on this item.
Explanation / Answer
(1) The correct answer is option C. Yakov spends a significant amount of time researching resorts for a long overdue vacation, paying special attention to resorts' chefs and food options Because this vacation is important to Yakov, as a rational consumer, he wants to make a well-informed choice. Yakov is not irrational because he wants to make an informed choice.
(2) The correct option is (b). In economics, it is a fundamental assumption that the marginal utility declines as consumption increases. Yakov has always been fond of tuna sushi. However, after having tuna sushi every day for a week while on vacation, he grew tired of his favorite meal because As Yakov consumes more and more of his favorite meal, the marginal utility of additional servings of tuna sushi declines.
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