Suppose You Value Watching a Movie at $5

question 142

Multiple Choice

Suppose you value watching a movie at $5. You rent it from your local movie rental store for $3.50 for one night. You do not get a chance to watch it, so you decide to keep it an extra day and pay a late fee of $2. Your decision is

• A) incorrect; you paid $5.50 to watch a movie you valued at only $5. You should have taken the movie back.
• B) incorrect; you should have returned the movie and rented it later.
• C) correct; the $3.50 paid for the first night is a sunk cost and is not relevant in your decision to keep it an additional night.
• D) correct; you value watching the movie at $5 per night, so keeping it an extra day increases your value of the movie to $10.

Appreciate the continuum of offerings between tangible products and intangible services.

Recognize the cost structures associated with service delivery, including inventory carrying costs.

Understand how services can be classified by various criteria including the level of tangible vs. intangible attributes, and the sector (public, private, nonprofit).

Understand the different debt instruments used by public corporations to finance their activities.

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Definitions:

Heredity

The passing of traits from parents to offspring through genes.

Pelvic Inflammatory Disease

An infection of the female reproductive organs, often caused by sexually transmitted infections, leading to severe health complications including infertility.

PID

Pelvic Inflammatory Disease, a condition affecting women characterized by infection and inflammation of the reproductive organs, often caused by sexually transmitted infections.

Spontaneous Abortion

Unplanned, accidental abortion.