Buddy has $2000 in a checking account and wants to buy a new MacBook for $1100. Buddy decides he needs the money in his account to pay his bills next month and so puts the $1100 on his credit card and pays it off gradually over the next several months. Buddy choosing to "save" his cash on hand for everyday expenses is:
A. rational, since Buddy can now pay all his bills with a small credit card payment each month.
B. going to make Buddy wealthier in the long run.
C. rational, since he has his new computer and has money in the bank.
D. irrational, since money is fungible.
Answer: D
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What will be an ideal response?
For this utility function, the MRS:
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