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 cars,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 cars,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 of comparing the marginal benefits and costs of replacing their cars with a more efficient one. The Cash for Clunkers program made sure that the marginal benefits would exceed the marginal costs, which would incentivize consumers to participate in the program. Therefore, choice A is the correct answer.

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