Shawna Is Considering One of Two Options

question 84

Multiple Choice

Shawna is considering one of two options. The first option is to receive $1,800 per month for the first 5 years and $2,000 per month for the last 5 years based on an interest rate of 6.5% compounded monthly. The second option is to receive $145,000 now. Determine which option should be chosen to maximize benefits now.

• A) First option, as it provides benefit of $165,915.26 compared to $145,000 for second
• B) First option, as it provides benefit of $155,915.16 compared to $145,000 for second
• C) First option, as it provides benefit of $152,915.16 compared to $145,000 for second
• D) First option, as it provides benefit of $150,915.16 compared to $145,000 for second
• E) First option, as it provides benefit of $145,915.16 compared to $145,000 for second

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Definitions:

Allocative Inefficiency

Allocative Inefficiency occurs when the allocation of resources does not correspond to consumer preferences, resulting in misallocation of resources and potential welfare losses.

Pure Monopolist

A market situation in which a single company or entity exclusively controls the supply of a particular good or service, with no close substitutes.

Price Discrimination

A pricing strategy where a firm sells the same product at different prices to different groups of consumers, based on their willingness to pay.

Movie Theater

A place where films are shown to the public for entertainment, typically featuring large screens and seating areas.