Doug wants to start up his own business, and needs $25,000 to get it off the ground. He can either withdraw it from his savings account, where he currently earns 3 percent, or he can take out a loan for $25,000 and pay 5 percent interest. Doug should compare:

A. the explicit cost of $750 to the implicit cost of $1,250 and choose to use his savings.
B. the explicit cost of $25,750 to the explicit cost of $26,250 and choose to borrow the money.
C. the implicit cost of $750 to the explicit cost of $1,250 and choose to borrow the money.
D. the implicit cost of $750 to the explicit cost of $1,250 and choose to use his savings.


Answer: D

Economics

You might also like to view...

If a consumer prefers apples to bananas and prefers bananas to citrus fruit, in order to satisfy assumptions about preferences she has to prefer

A) bananas to apples. B) citrus fruit to bananas. C) apples to citrus fruit. D) citrus fruit to apples.

Economics

When consumer spending is high, the economy usually is in a(n)

A. depression. B. growth stage. C. inflationary period. D. recession.

Economics

Studies using the gravity model have found that countries that have a common currency trade more with each other.

Answer the following statement true (T) or false (F)

Economics

People tend to track consumption by the bundles in which a product is delivered rather than the actual consumption of the product.

Answer the following statement true (T) or false (F)

Economics