If the Construction of a New Elementary School Would Create

question 21

Multiple Choice

If the construction of a new elementary school would create $5 million worth of benefits for citizens and cost $7 million to construct, then using the criterion of economic efficiency, the school

• A) should be built.
• B) should not be built.
• C) results in a substantial improvement to the welfare of society.
• D) should be built if it passes by a majority vote.

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Definitions:

Guaranteed Minimum

The lowest amount assured by a contract, regardless of external conditions or outcomes.

Annual Rates

Refers to the interest rate or growth rate over a one-year period, often used in financial contexts.

Strip Bond

A financial instrument resulting from the separation of the coupon payments and the principal of a regular bond, where each part is sold separately as a zero-coupon bond.

Market Yield

The return on investment for a security anticipated in the marketplace, reflecting its current price and income it generates.