Shane Contracts to Build a Garage for Bob for a Price

question 82

Multiple Choice

Shane contracts to build a garage for Bob for a price of $6,000.Because of an increase in the cost of labor and materials, Shane refuses to perform.Bob wants the garage, so he agrees to pay an additional $500.In this case:

• A)Bob must pay the additional $500.
• B)Shane has given no additional consideration, and under the common law he must perform at the agreed-upon original price.
• C)the substitute agreement is an illusory contract.
• D)the debt is a disputed one, and therefore Bob is obligated to pay the additional money.

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Definitions:

Consumer Surplus

Consumer surplus is the difference between the total amount that consumers are willing and able to pay for a good or service versus the total amount that they actually do pay.

Producer Surplus

The difference between what producers are willing to accept for a good or service versus what they actually receive, typically measured as the area above the supply curve and below the market price.

Marginal Benefit

The heightened satisfaction or usefulness derived from the consumption of an extra unit of a good or service.

Marginal Cost

The cost added by producing one extra item of a product. It's a critical concept in economics for determining the optimum production level.