Because People Make Decisions at the Margin, When Deciding Whether

question 100

Multiple Choice

Because people make decisions at the margin, when deciding whether to purchase a second car, they would therefore compare:

• A) the dollar cost of having two cars with the potential income the two cars may generate.
• B) the additional benefits expected from a second car with the total cost of the two cars.
• C) the additional benefits expected from a second car with the additional costs of the second car.
• D) None of the answers is correct.

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Definitions:

Interest Rate Risk

The risk of investment value changes due to variations in the level of interest rates.

Zero-Coupon

A bond that does not pay periodic interest and is issued at a substantial discount from its face value.

Coupon

The interest rate stated on a bond when issued, which represents the annual interest payment made to the bondholder.

Real Rate Of Return

The yearly percent gain achieved from an investment, corrected for price variations caused by inflation or other external factors.