Econ Micro (book Only)
6th Edition
ISBN: 9781337408066
Author: William A. McEachern
Publisher: Cengage Learning
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Chapter 1, Problem 2P
To determine
a)
The effect of rational self-interest while deciding between attending a college full time or working for full time.
Concept introduction:
Rational self-interest means every person tries to maximize the benefit or to minimize the associated cost.
To determine
b)
The effect of rational self-interest while deciding between buying a new textbook or a used one.
Concept introduction:
Rational self-interest means every person tries to maximize the benefit or to minimize the associated cost.
Opportunity cost is the opportunity lost by choosing one alternative over the other.
To determine
c)
The effect of rational self-interest while deciding between attending a local college or an out of Town College.
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2.Answer the question.
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can you explain what the correct answer is and why?
1. Part 1
(a) What are the three basic axioms of preferences in the rational choice model that are
sufficient to ensure that a utility function exists?
(b) What is it called when one of those axioms is violated?
(c) What is a reference point?
(d) Draw a graph of the indifference curves of someone who could be influenced by either of
two reference points.
(e) Is one of the axioms above violated by those indifference curves? If so, which one?
(f) Explain how those indifference curves violate the axiom you identified, by labeling some
points on the indifference curves and indicating the exact violation.
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