In 2009,the federal government created a program called Cash for Clunkers whereby consumers could trade in a less efficient car for a more efficient car and receive a higher value than they would have otherwise.How would an economist understand the decision that consumers faced?
A) Consumers would compare the marginal benefits to the marginal costs of replacing their car, and this program made sure that marginal benefits would exceed marginal costs.
B) Consumers would compare the marginal benefits to the marginal costs of replacing their car, and this program made sure that marginal costs would exceed marginal benefits.
C) The Cash for Clunkers program increased the opportunity cost of replacing a car.
D) The Cash for Clunkers program served as a negative incentive to replacing a fuel-inefficient car.
E) The Cash for Clunkers program served as an indirect incentive to replacing a fuel-inefficient car.

Question

Quizplus · Accepted Answer

An economist would understand that consumers faced a decision between the marginal benefits and marginal costs of replacing their car. The Cash for Clunkers program ensured that the marginal benefits of getting a more efficient car would exceed the marginal costs, which incentivized consumers to participate in the program.

In 2009,the Federal Government Created a Program Called Cash for Clunkers