Decisions That Involve Doing Something or Not (E

question 94

Multiple Choice

Decisions that involve doing something or not (e.g. ,seeing a movie) and decisions that involve choosing a level (e.g. ,square footage of an apartment) are

• A) dissimilar,requiring two different models on how to decide.
• B) dissimilar,with the cost-benefit principle useful only when deciding on the level.
• C) similar,requiring a comparison of total benefits and total costs.
• D) similar,requiring a comparison of marginal benefits and marginal costs.
• E) similar,requiring a comparison of average benefits and average costs.

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Definitions:

Demand Function

A mathematical representation of the relationship between the quantity demanded of a good and its influencing factors, like price.

Cobb-Douglas

A type of production function used in economics to represent the relationship of an output to inputs, specifically capital and labor, with constants denoting the output elasticity of each input.

Perfect Substitutes

Two or more goods that can be used in place of one another with no loss of utility for the consumer, resulting in constant marginal rates of substitution.

Perfect Substitutes

Goods or services that can be used in exactly the same way and are interchangeable by consumers.