Adele doesn't like to wait to purchase items that she wants, but Agnes prefers to pay for things she wants in full. They are both planning on buying a video game system. The store is running an offer that consumers can buy the system for $400 or pay $120 per month for four months. If Adele is a hyperbolic discounter and if the discount rate for the first two months is 50% and then 2% thereafter, then Adele is better off _____ because _____.
A) paying once; the net present value of financing is greater than $400
B) paying once; the net present value of financing is less than $400
C) paying over four months; the net present value of financing is greater than $400
D) paying over four months; the net present value of financing is less than $400

Question

Quizplus · Accepted Answer

The Answer of Adele doesn't like to wait to purchase items that she wants, but Agnes prefers to pay for things she wants in full. They are both planning on buying a video game system. The store is running an offer that consumers can buy the system for $400 or pay $120 per month for four months. If Adele is a hyperbolic discounter and if the discount rate for the first two months is 50% and then 2% thereafter, then Adele is better off _____ because _____.
A) paying once; the net present value of financing is greater than $400
B) paying once; the net present value of financing is less than $400
C) paying over four months; the net present value of financing is greater than $400
D) paying over four months; the net present value of financing is less than $400

Adele Doesn't Like to Wait to Purchase Items That She