Last month, Sally spent $3,000 in repairing her old car. Now her car requires an additional $2,000 in repairs. She could get a comparable car for $2,500 . She should
a. repair her car because the money she has already spent repairing the car ($3,000 . exceeds the price of the new car ($2,500)
b. buy a new car because sunk costs should be ignored in decision making
c. buy a new car because the price of the new car ($2,500) is less than the total amount she would spend on her current car ($5,000)
d. repair her car since the cost of repairing it is lower than the cost of buying another car
e. repair the car or buy a comparable one because the opportunity costs are the same
D
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The principle of minimum differentiation reflects the
A) tendency for firms to produce at minimum marginal cost in order to compete with one another. B) tendency for political parties to make themselves identical to appeal to the median voter. C) concept of minimizing the difference between total benefit and total cost to produce efficiently. D) attempt to minimize the free-rider problem.
When a Canadian citizen enjoys military protection in Canada without contributing to the cost of Canada's defense budget, then
A) this Canadian citizen is a free rider. B) Canada is a free rider. C) this citizen receives no benefits if Canada is attacked. D) Canada's defense budget will run out of funds.