Microeconomics, Student Value Edition Plus MyLab Economics with Pearson eText -- Access Card Package (9th Edition) (Pearson Series in Economics)
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Chapter 4, Problem 14E
To determine

The factors influencing decision making.

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Sophia is a contestant on a game show and has selected the prize that lies behind door number 3.The show’s host tells her that there is a 50% chance that there is a $15,000 diamond ring behindthe door and a 50% chance that there is a goat behind the door (which is worth nothing to Sophia,who is allergic to goats). Before the door is opened, someone in the audience shouts, “I will giveyou the option of selling me what is behind the door for $8,000 if you will pay me $4,500 for thisoption.” [Assume that the game show allows this offer.]a. If Sophia cares only about the expected dollar values of various outcomes, will she buythis option?b. Explain why Sophia’s degree of risk aversion might affect her willingness to buy thisoption
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Nora's marginal benefit exceeds her marginal cost by the greatest amount when she is consuming 10 units of product Y. To maximize her net benefit, Norah should: Select one: a. consume more than 10 units of the product. b. have stopped consuming the product before he reached 10 units. c. give up more of good Y for another good d. stop consuming at 10 units. e. not enough information to answer the question.
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