Suppose That Your Public Library Charges a Fixed Monthly Membership

question 152

Multiple Choice

Suppose that your public library charges a fixed monthly membership fee of $12.Members are allowed to check out as many books as they want under this plan.The average member checks out 4 books per month.Suppose that your public library changes its policy.Now each book costs $3 to check out but there is no longer a monthly membership fee.What effect do you think the new policy will have on the total number of books checked out from your library each month? The new policy is likely to ______the number of books checked out because ________.

• A)leave unchanged;members have already shown that they are willing to pay $12 to check out 4 books per month
• B)leave unchanged;the average cost of the library service is the same under both plans
• C)reduce;the marginal benefit of checking out books is now lower under the new policy
• D)reduce;the marginal cost of checking out books is now higher under the new policy
• E)increase;the average benefit of checking out more than 4 books is now higher under the new policy

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Definitions:

Cash Sales

Transactions where payment is received by the seller at the same time the buyer receives the goods or services.

Accounts Receivable

Money owed to a company by its customers for products or services that have been delivered but not yet paid for.

Credit Sales

Transactions where goods or services are sold by a business but payment is received at a later date.

Cash Sales

Transactions in which payment for goods or services is made at the time of sale, typically in cash form.