Bill and Alma are shopping for their first home.They have found two houses that are nearly identical except for their locations.One house costs $250,000 and is 15 miles from their places of employment.The second house costs $275,000,but it is within 5 miles of where they both work.Now Bill and Alma are trying to decide if living 10 miles closer to their workplaces is worth the extra $25,000 in the cost of the house.Which decision-making concept are they using?
A)Opportunity cost
B)Marginal analysis
C)Time value of money
D)Total utility

Question

Quizplus · Accepted Answer

Bill and Alma are using the concept of marginal analysis, which involves considering the costs and benefits of a decision incrementally. They are comparing the additional cost of $25,000 with the benefit of being 10 miles closer to their workplaces. This is an example of weighing the marginal cost against the marginal benefit, which is the core principle of marginal analysis.

Bill and Alma Are Shopping for Their First Home