Decisions that involve doing something or not (e.g. ,seeing a movie)and decisions that involve choosing a level (e.g. ,square footage of an apartment)are
A) dissimilar,requiring two different models on how to decide.
B) dissimilar,with the cost-benefit principle useful only when deciding on the level.
C) similar,requiring a comparison of total benefits and total costs.
D) similar,requiring a comparison of marginal benefits and marginal costs.
E) similar,requiring a comparison of average benefits and average costs.

Question

Quizplus · Accepted Answer

Both decisions involve choosing between alternatives, and the cost-benefit principle applies in both cases. In the first scenario, we must compare the additional enjoyment and cost of seeing a movie versus not seeing it. In the second scenario, we must compare the additional benefits and costs of choosing a larger apartment versus a smaller one. In both cases, we must consider marginal benefits and marginal costs, which are the additional benefits and costs of choosing one option over the other. Therefore, the best choice is D.

Decisions That Involve Doing Something or Not (E