1. Assume you must choose between two mutually exclusive alternatives: A or B. The explicit benefityou receive from alternative A, bª, is equal to $100. And, the explicit cost of choosing alternative A,c*, is $80. Also, the explicit benefit to choosing alternative B, b", is $120.What is the accounting return for choosing alternative A, r^?Given r and b", what is the explicit cost that you are willingness to pay (WTP) foralternative B, WTP"? Please include the formulas from class in your answer. How wouldWTPB change ifr^ increased by $5? Explain.yourUsing the original set of values for explicit costs and benefits, what would be your economicreturn to choosing alternativeHow does this relate to the concept of consumer surplus?if the price that you were charged was $95? Please interpret.

Given, Alternative A $80 Alternative B $120

Answered: Assume you must choose between two…

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter17: Capital And Time

Section: Chapter Questions

Problem 17.7P

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