Author Question: Kendrick wants to start a tax preparation company and is going to his bank to borrow 50,000. This is ... (Read 86 times)

Awilson837 · **on:** Jun 29, 2018

Kendrick wants to start a tax preparation company and is going to his bank to borrow 50,000. This is an example of

A) a primary market transaction. B) indirect finance.
C) a secondary market transaction. D) direct finance.

Question 2

Newspaper machines and soda vending machines operate very differently. The newspaper machine is a mechanical box. You place your four quarters in the machine and you open the door and low and behold there is a stack of newspapers at your disposal.

Most people take one and close the door for the next patron to purchase his own copy. But notice that soda vending machines don't operate the same way. They are also mechanical but when the four quarters are inserted and a selection is made only one can of soda is available for the consumer to purchase. Explain in terms of marginal utility why these two machines are designed so differently?

nital · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

B

Answer to Question 2

The marginal utility of a second newspaper is most likely to be zero for most people. That is, the extra added satisfaction of acquiring a second newspaper is probably negligible. After all, it contains all of the same news as the first copy. However, the cans of cold beverage that remain in the soda machine still have positive marginal utility even though it may be less than the marginal utility of the first can. It pays for the vendor to design a machine that keeps the rest of the cans of soda away from those who might not be inclined to pay for the second can of soda.