Suppose that your public library charges a fixed monthly membership fee of $12.

Question

Suppose that your public library charges a fixed monthly membership fee of $12. Members are allowed to check out as many books as they want under this plan. The average member checks out 4 books per month. Suppose that your public library changes its policy. Now each book costs $3 to check out but there is no longer a monthly membership fee. What effect do you think the new policy will have on the total number of books checked out from your library each month? The new policy is likely to ______the number of booked checked out because ________.

A. reduce; the marginal cost of checking out books is now higher under the new policy

B. leave unchanged; members have already shown that they are willing to pay $12 to check out 4 books per month

C.increase; the average benefit of checking out more than 4 books is now higher under the new policy

D.reduce; the marginal benefit of checking out books is now lower under the new policy

E.leave unchanged; the average cost of the library service is the same under both plans

Explanation / Answer

Ans

Reduce becsuse now marginal cost is higher. Earlier it was zero now it is 3 dollars per book

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