When Deciding Whether to Buy a Second Car, the Economic

question 36

Multiple Choice

When deciding whether to buy a second car, the economic way of thinking indicates that the purchaser should compare

• A) the benefits expected from two cars with the cost of both.
• B) the additional benefits expected from a second car with the cost of the two cars.
• C) the dollar cost of the two cars with the potential income that the cars will generate.
• D) the additional benefits of the second car with the additional cost of the second car.

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Definitions:

Discounting

In finance, refers to the process of determining the present value of a payment or a series of payments that will be received in the future.

Note Payable

A written agreement to pay a specified sum of money, plus interest, on a set date, representing a liability for the issuer.

Proceeds

The total amount of money received from a transaction before any deductions are made for costs or expenses.

Interest-Bearing

Referring to debt securities or loans that accrue interest over time, payable to the holder or lender.