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Question
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.
Answer
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