Suppose That Your Public Library Charges a Fixed Monthly Membership

question 283

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 booked 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:

Process Innovation

The implementation of a new or significantly improved production or delivery method, enhancing efficiency or reducing costs in the manufacturing or distribution of goods and services.

Income

The financial gain or money received by an individual or entity, usually through work, investments, or business operations.

Income

Financial earnings acquired regularly from work or investment profits.

Total Utility

The total satisfaction or benefit derived by a consumer from consuming a given quantity of goods or services.