Matt Has Decided to Purchase His Textbooks for the Semester

question 123

Multiple Choice

Matt has decided to purchase his textbooks for the semester. His options are to purchase the books via the Internet with next day delivery to his home at a cost of $175, or to drive to campus tomorrow to buy the books at the university bookstore at a cost of $170. Last week he drove to campus to buy a concert ticket because they offered 25 percent off the regular price of $16. Assume the minimum that Matt would be willing to accept to drive to the university campus is equal to the amount he saved on the concert ticket. What would be the amount of his economic surplus if he bought his textbooks at the university bookstore rather than via the Internet?

• A) $5
• B) $1
• C) $50
• D) $20

---

Definitions:

Finished Goods

Products that have completed the manufacturing process but have not yet been sold or distributed to end customers.

Standard Costs

Predetermined or budgeted costs for products, services, or operations that serve as benchmarks for measuring performance by comparing them with actual costs.

Normal Absorption Costing

A method of product costing that assigns all manufacturing costs to products, including both variable and fixed overhead, based on a normal level of operation.

Budgeted Rate

A predetermined rate used in budgeting to estimate costs or revenues for a specific activity or product.