The Cycle Shoppe Has Decided to Offer Credit to Its

question 73

Multiple Choice

The Cycle Shoppe has decided to offer credit to its customers during the spring selling season.Sales are expected to be 330 bicycles.The average cost to the shop of a bicycle is $300.The owner knows that only 93 percent of the customers will be able to make their payments.To identify the remaining 7 percent,she is considering subscribing to a credit agency.The initial charge for this service is $540,with an additional charge of $6 per individual report.What is the amount of the net savings from subscribing to the credit agency?

• A)$3,790
• B)$3,920
• C)$4,080
• D)$4,410
• E)$4,950

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Definitions:

Negative Externalities

Costs suffered by a third party due to an economic transaction they were not involved in.

Public Goods

Goods that are non-excludable and non-rivalrous, meaning individuals cannot be effectively excluded from use and where use by one individual does not reduce availability to others.

Marginal Social Benefit

The additional benefit to society from consuming one more unit of a good or service, considering both private and external benefits.

Marginal Social Cost

The additional cost to society as a whole for producing one more unit of a good or service.