In the Early 1990s,before Pay at the Pump Was an Option,a

question 87

Multiple Choice

In the early 1990s,before pay at the pump was an option,a gas station decides to force people to pre-pay due to drive-offs.The opportunity cost of this decision may include:

• A) the value of the gas that is no longer stolen by people who drove off.
• B) not having to look outside for people waving at you to turn on the pump.
• C) lost revenue when people under estimate what they think their gas tanks will hold in order to avoid going back into the store to get change from overpayment.
• D) a loss of snack sales because people decide to come into the store to pay for gas before pumping versus after pumping their gas.

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Definitions:

Interest Rates

The amount charged by lenders to borrowers for the use of money, expressed as a percentage of the principal, typically on an annual basis.

Pure Expectations Hypothesis

A theory that suggests that the interest rates on long-term bonds will equal an average of current and future short-term interest rates.

Yield Curve

A graphical representation showing the relationship between the interest rates on debts of different maturities, typically of government bonds, highlighting investors' expectations for future interest rates and economic conditions.

Liquidity Premium

An additional return that investors demand for holding securities that are not easily convertible into cash without a significant loss in value.