If Project a Has a Cost of $5 and Provides

question 41

Multiple Choice

If Project A has a cost of $5 and provides a benefit of $10,and Project B has a cost of $2 and provides a benefit of $4,then switching from Project A to Project B ________.

• A) increases the net benefit by $3
• B) decreases the net benefit by $3
• C) increases the net benefit by $6
• D) decreases the net benefit by $6

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Definitions:

MUb/Pb

A concept from economics that compares the additional utility gained from consuming one more unit of a good (MUb) to its price (Pb), often used in optimal consumption analysis.

Maximizing Utility

The economic principle that individuals seek to achieve the highest level of satisfaction possible from their consumption of goods and services, given their income and the prices of those goods and services.

Marginal Rate

The rate at which one variable changes with respect to a minute increase in another variable, often used in the context of marginal tax rates or marginal rates of substitution in economics.

Market Basket A

A selected set of goods and services used to monitor changes in price levels over time, often for the purpose of calculating inflation.