Question

Imagine that a high school junior sold her old car at the end of the summer and now has the funds from the sale in her bank. She decides to purchase a much needed new automobile instead of saving that money to pay for her senior trip coming up next year. From an economist’s perspective, which of the following statements about this decision is likely to be true?

a) The decision must have been made haphazardly and is therefore irrational.

b) The decision is irrational because anyone can see that choosing a new automobile over a once in a lifetime senior trip is an improper use of scarce resources.

c) The decision is rational in the sense that it reflects the junior's preference for a new automobile over a senior trip.

Answer 1

"C"

The decision is rational in the sense that it reflects the junior's preference for a new automobile over a senior trip. She has choosen what she values the most.