The following accompanying table shows the relationship between the speed of a computer's CPU and its benefits and costs. Assume that all other features of the computer are the same (that is, CPU speed is the only source of variation), and only the CPU speeds listed below are available for purchase. $\begin{array}{|c|c|c|c|c}
\hline \text { CPU GHz } & \text { Total Benefit } & \text { Marginal Benefit } & \text { Total Cost } & \text { Marginal Costs } \
\hline 2.0 & \$ 1,000 & & \$ 900 & \
\hline 2.5 & \$ 1,400 & & & \$ 100 \
\hline 3.0 & & \$ 300 & \$ 1,200 \
\hline 3.5 & \$ 1,900 & & \$ 1,500 & \
\hline 4.0 & \$ 2,000 & & & \$ 400 \
\hline
\end{array}$
Application of the Cost-Benefit Principle would lead one to purchase a ________ computer.

Question

The following accompanying table shows the relationship between the speed of a computer's CPU and its benefits and costs. Assume that all other features of the computer are the same (that is, CPU speed is the only source of variation), and only the CPU speeds listed below are available for purchase.  $\begin{array}{|c|c|c|c|c}
\hline \text { CPU GHz } & \text { Total Benefit } & \text { Marginal Benefit } & \text { Total Cost } & \text { Marginal Costs } \
\hline 2.0 & \$ 1,000 & & \$ 900 & \
\hline 2.5 & \$ 1,400 & & & \$ 100 \
\hline 3.0 & & \$ 300 & \$ 1,200 \
\hline 3.5 & \$ 1,900 & & \$ 1,500 & \
\hline 4.0 & \$ 2,000 & & & \$ 400 \
\hline
\end{array}$  
Application of the Cost-Benefit Principle would lead one to purchase a ________ computer.

Quizplus · Accepted Answer

The Cost-Benefit Principle suggests choosing the option where the marginal benefit exceeds or equals the marginal cost, but additional benefits do not justify the additional costs. The table shows that moving from a 2.5GHz to a 3.0GHz CPU increases the total benefit by $300 (from $1,400 to $1,700, though the $1,700 total benefit for 3.0GHz is not directly shown, it is implied by the marginal benefit), while the total cost increases by $100 (from $1,000 to $1,200). This is the only upgrade where the marginal benefit ($300) exceeds the marginal cost ($100). Upgrading beyond 3.0GHz results in higher costs than benefits (e.g., moving to 4.0GHz costs an additional $400 for only a $100 increase in benefit), making the 3.0GHz CPU the most cost-effective choice.

The Following Accompanying Table Shows the Relationship Between the Speed of a Computer's