Critique of the Maximizing Behaviour of Consumers & Producers (DP IB Economics: HL)

Exam Questions

15 mins7 questions
12 marks

Text A, Paragraph 1

In Canada, consumers often make purchasing decisions based on the assumption of rationality, expecting that they will maximise their utility with available information. However, this assumption may not always hold in reality.

Define the term rationality as indicated in bold (Text A, Paragraph 1).

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22 marks

Text E, Paragraph 1

Consumers in Japan often assume they are making rational purchasing decisions. However, factors like marketing and social influence can cause them to deviate from rational consumer choice.

State two assumptions of rational consumer choice indicated in bold (Text E, Paragraph 1).

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32 marks

Text E, Paragraph 2

In South Korea, the government uses nudges to encourage citizens to save more for retirement, offering reminders and default options in pension schemes to influence decision-making.

Define the term nudge as indicated in bold (Text E, Paragraph 2).

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42 marks

Text B, Paragraph 1

The grocery store chain Aldi uses restricted choice by offering a limited range of products, making it easier for consumers to make decisions without being overwhelmed by too many options.

Define the term restricted choice as indicated in bold (Text B, Paragraph 1).

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52 marks

Text E, Paragraph 2

A firm in Mexico is focused on profit maximisation, producing goods until the point where marginal profit is zero, ensuring that it cannot increase profits by producing more.

Define the term profit maximisation as indicated in bold in (Text E, Paragraph 2).

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62 marks

Text D, Paragraph 3

A clothing company in Spain has shifted its focus from maximising profits to growing its market share, prioritising sales growth over immediate profits.

State two business objectives, apart from profit maximisation, that a company like the one in Spain might pursue, as indicated in (Text D, Paragraph 3).

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73 marks

Text A, Paragraph 1

A telecommunications company in Brazil focusses on profit maximisation, producing up to the point where marginal revenue equals marginal cost to maximise its profits.

Question: Draw a diagram to show profit maximisation for the telecommunications company in Brazil as indicated in bold (Text A, Paragraph 1).

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