Question

QUESTION 6 Karen is taking Hagen shopping because they both need a new pair of jeans but neither enjoys online shopping. In the large shopping centre they go to there are fifteen stores that sell jeans: nine sell both men's and women's jeans and the other six sell only women's jeans. 1. Hagen and Karen need to view all the stores as the market is perfectly competitive and they have full information. 2. Karen and Hagen should visit only up to the 7th store if this is where they believe the MB of attaining the information equals the MC of searching. 3. Karen and Hagen should visit every store to find the cheapest pair of jeans. Which of the following statements are true: Only 1 is true. Only 2 is true O Both 1 and 2 are true. OBoth 2 and 3 are true. O All three are true.

Answer 1

Only 2 is true

When they both search all the stores and find the cheapest jeans , marginal cost of searching rises which can decrease the benefits of finding the cheapest jeans. Also market is not perfectly competitive as all sellers charge different prices.