Your favorite clothing website is offering a new shipping promotion: you can pay a $24 membership fee and receive free shipping for 12 months, or you can continue to receive free shipping as long as you spend at least $50 with every order. Otherwise you will have to pay $6 per shipment. You think $24 sounds like a good deal, but you do not want to make the mistake of being overconfident. Explain how you would make your decision.
What will be an ideal response?
Overconfidence results when consumers do not accurately assess the odds that a given result will occur. They might suggest reviewing your spending habits to date and seeing what the average amount of money you spent on shipping from that firm was over the previous 12 months. Or students might suggest examining the prices of the clothing you tend to buy on the website. If the clothing prices are always over $50, then the membership fee is not a good deal because you will always receive free shipping. If the clothing prices are usually under $50, the membership fee may save you money if you order more than four times per year.
You might also like to view...
The economy pictured in the figure below has a(n) ________ gap with a short-run equilibrium combination of inflation and output indicated by point ________.
A. recessionary; B B. recessionary; C C. recessionary; A D. expansionary; A
What effect does a contractionary monetary policy in the U.S. have on the foreign trade sector?
A) The higher value of the dollar will decrease imports and increase exports. B) The higher value of the dollar will decrease exports and increase imports. C) The lower value of the dollar will decrease imports and increase exports. D) The lower value of the dollar will decrease exports and increase imports.
If the cross elasticity of demand between goods X and Y is positive and between goods X and Z is negative, then X and Y are ________ and X and Z are ________
A) price inelastic; complements B) complements; substitutes C) substitutes; complements D) price inelastic; income elastic
One barrier to entry into a monopoly market is:
A. the existence of large economies of scale. B. very large fixed costs relative to variable costs. C. the high cost of required infrastructure for an industry. D. All of these statements are true.