The following 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. $$\begin{array} { | c | c | c | c | c | }
\hline \begin{array} { c }
\text { CPU } \
\mathrm { GHz }
\end{array} & \begin{array} { c }
\text { Total } \
\text { Benefit }
\end{array} & \begin{array} { c }
\text { Marginal } \
\text { Benefit }
\end{array} & \begin{array} { c }
\text { Total } \
\text { Cost }
\end{array} & \begin{array} { c }
\text { Marginal } \
\text { Cost }
\end{array} \
\hline 2.0 & \$ 1,000 & & \$ 900 & \
\hline 2.5 & \$ 1,400 & & & \$ 100 \
\hline 3.0 & & \$ 300 & \$ 1,200 & \
\hline 3.5 & \$ 1,900 & & \$ 1,500 & \
\hline 4.0 & \$ 2,000 & & & \$ 400 \
\hline
\end{array}$$ Application of the Cost-Benefit Principle would lead one to purchase a ______ computer.

Question

The following 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. $$\begin{array} { | c | c | c | c | c | } 
\hline \begin{array} { c } 
\text { CPU } \
\mathrm { GHz }
\end{array} & \begin{array} { c } 
\text { Total } \
\text { Benefit }
\end{array} & \begin{array} { c } 
\text { Marginal } \
\text { Benefit }
\end{array} & \begin{array} { c } 
\text { Total } \
\text { Cost }
\end{array} & \begin{array} { c } 
\text { Marginal } \
\text { Cost }
\end{array} \
\hline 2.0 & \$ 1,000 & & \$ 900 & \
\hline 2.5 & \$ 1,400 & & & \$ 100 \
\hline 3.0 & & \$ 300 & \$ 1,200 & \
\hline 3.5 & \$ 1,900 & & \$ 1,500 & \
\hline 4.0 & \$ 2,000 & & & \$ 400 \
\hline
\end{array}$$ Application of the Cost-Benefit Principle would lead one to purchase a ______ computer.

Quizplus · Accepted Answer

The Cost-Benefit Principle suggests purchasing the option where the marginal benefit equals or exceeds the marginal cost. At 3.0 GHz, the marginal benefit is $300, and the marginal cost is $300, making it the optimal choice.

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