Assume That a Government Is Considering a New Social Program

question 23

Multiple Choice

Assume that a government is considering a new social program and may choose to include in this program one of four progressively larger projects. The marginal cost and the marginal bene?ts of each of the four
Projects are given in the table below.
$$\begin{array} { | c | c | c | } \hline \text { Project } & \text { Marginal Cost } & \text { Marginal Benefit } \\\hline A & \$ 1 \text { Billion } & \$ 2 \text { Billion } \\\hline B & 2 \text { Billion } & 3 \text { Billion } \\\hline C & 5 \text { Billion } & 7 \text { Billion } \\\hline D & 7 \text { Billion } & 8 \text { Billion } \\\hline\end{array}$$ Suppose that the government chooses to do project C. What is the total cost and total bene?t of doing project
C?

• A) Total cost is $5 billion, and total bene?t is $7 billion.
• B) Total cost is $4 billion, and total bene?t is $7 billion.
• C) Total cost is $8 billion, and total bene?t is $12 billion.
• D) Total cost is $15 billion, and total bene?t is $20 billion.

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Definitions:

Bailment Agreement

A legal arrangement in which one party temporarily transfers possession of property to another, with the understanding that it will be returned.

Court Order

A formal direction issued by a court or judge requiring a person or entity to do or not do something.

Bankruptcy Case

A legal process through which individuals or businesses unable to meet their financial obligations can seek relief from some or all of their debts.

Tangible Property

Physical assets that can be touched and seen, such as real estate, vehicles, and equipment.