If a Motorist Is Stranded in Front of a Pay

question 234

Multiple Choice

If a motorist is stranded in front of a pay phone and has only dollar bills, and he ends up buying a quarter from a passerby for $1,

• A) the stranded motorist must not understand that four quarters are worth $1.
• B) economic theory is unable to explain this transaction.
• C) both parties have gained from this exchange.
• D) the passerby was made better off and the motorist worse off.

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Definitions:

Opportunity Cost

Opportunity cost refers to the potential benefits an individual, investor, or business misses out on when choosing one alternative over another.

Net Float

The difference between checks written against and deposited in an account and those that have been cleared and charged against the account.

Short-term Investments

Financial assets that are expected to be converted into cash or sold within a short timeframe, usually one year or less.

Zero-balance Account

A checking account set up to maintain a balance of zero by automatically transferring funds from a master account in the exact amount of transactions.