"There Is No Such Thing as a Free Lunch

question 47

Multiple Choice

"There is no such thing as a free lunch." This statement best reflects the fact that

• A) consumers are unwilling to pay for a good unless it provides them with value.
• B) an opportunity cost is always present when scarce resources are used to produce a good.
• C) it generally requires enormous effort to search out the best place to eat lunch.
• D) the value of a good to consumers will decrease as they have more of it.

---

Definitions:

Salvage Value

An asset's expected selling price once it has concluded its period of usefulness.

Sunk Costs

Past expenditures that have already been incurred and cannot be recovered.

Incremental Cash Flows

The extra cash flow from operations generated by a company when it embarks on a new project.

Net Present Value

The difference between the present value of cash inflows and outflows over a period of time, used in capital budgeting to assess the profitability of an investment.