The Following Table Shows the Relationship Between the Speed of a Computer's

question 94

Multiple Choice

The following table shows the relationship between the speed of a computer's CPU and the benefits and costs. Assume that all other features of the computer are the same, i.e., CPU speed is the only source of variation. $$\begin{array} { | l | l | l | l | l | } \hline \text { CPU Mhz } & \text { Total Benefit } & \text { Marginal Benefit } & \text { Total Cost } & \text { Marginal Cost } \\\hline 600 & \$ 1,000 & & \$ 900 & \\\hline 700 & \$ 1,500 & & & \$ 100 \\\hline 800 & & \$ 400 & \$ 1,400 & \\\hline 900 & \$ 2,200 & & \$ 1,900 & \\\hline 1,000 & \$ 2,400 & & & \$ 600 \\\hline\end{array}$$ Application of the cost-benefit principle would lead one to purchase a __________ computer because __________.

• A) 900 Mhz; the total benefit exceeds the total cost
• B) 700 Mhz; the marginal benefit is $500 and the marginal cost is $100
• C) 600 Mhz; it is certainly fast enough
• D) 800 Mhz; the marginal benefits and marginal costs are equal

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