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You have eaten two bowls of ice cream at Sundae School Ice Cream store
You have eaten two bowls of ice cream at Sundae School Ice Cream store. You consider eating a third. As a rational consumer you should make your choice by comparing:
a) The benefits from eating all three bowls of ice cream to how much three bowls of ice cream costs.
b) The benefits from eating all three bowls of ice cream to how much one more bowl of ice cream costs.
c) The benefits from eating one more bowl of ice cream to how much three bowls of ice cream costs.
d) The benefits from eating one more bowl of ice cream to how much one more bowl of ice cream costs.
Expert Solution
Answer: D
Rational individuals think at the margin and thus you should only look at the cost and benefit of eating one more bowl of ice cream, You ignore all previous activity because you can't change the past, it is a sunk cost. You will never get back your cost you already incurred in this case. Thus, you should only be focused on the additional bowl of ice cream.
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