In 2009,the Federal Government Created a Program Called Cash for Clunkers

question 28

Multiple Choice

In 2009,the federal government created a program called Cash for Clunkers whereby consumers could trade in a less efficient car for a more efficient car and receive a higher value than they would have otherwise.How would an economist understand the decision that consumers faced?

• A) Consumers would compare the marginal benefits to the marginal costs of replacing their car, and this program made sure that marginal benefits would exceed marginal costs.
• B) Consumers would compare the marginal benefits to the marginal costs of replacing their car, and this program made sure that marginal costs would exceed marginal benefits.
• C) The Cash for Clunkers program increased the opportunity cost of replacing a car.
• D) The Cash for Clunkers program served as a negative incentive to replacing a fuel-inefficient car.
• E) The Cash for Clunkers program served as an indirect incentive to replacing a fuel-inefficient car.

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Definitions:

Required Return

The minimum expected return an investor demands for the level of risk taken on an investment.

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