Bundle: ECON MICRO, 5th + Aplia, 1 term Printed Access Card
Bundle: ECON MICRO, 5th + Aplia, 1 term Printed Access Card
5th Edition
ISBN: 9781337192712
Author: William A. McEachern
Publisher: Cengage Learning
Question
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Chapter 2, Problem 1.1P
To determine

If the thought of finishing an expensive meal even if the appetite is full is right or not.

Concept Introduction:

Sunk cost: The cost which cannot be recovered

Expert Solution & Answer
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Explanation of Solution

This example is based on sunk cost.

The person has bought the expensive meal. despite feeling full, he eats the rest to finish it off because he wants to have a full worth of his money. But actually, this is not giving him anysatisfaction. In an economicsense, his utility will decrease with every additional bite he takes. his marginal utility will be negative and total utility decreases.

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Answer
M” method  Given the following model, solve by the method of “M”. (see image)
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