1. As a courtesy to its customers, a car rental agency ensures that each car it rents comes with a full tank of gas. In turn, the customer must choose—at the time the car is rented—one of the following three options (alternatives) for returning the car at the end of the rental period: A. Return the car with a full tank of gas. B. Return the car with less than a full tank and pay $5.00 per gallon to have the agency refill it. C. Accept a flat price of $45 for gas, regardless of how much gas is in the tank when returned. Suppose a customer rents a car and wants to select the most economical refueling option. The car has a 16- gallon gas tank and, on the average, can travel 25 miles per gallon of gas. And, if needed, the cost of gas in the area where the customer will be renting and using the car is $3.50 per gallon. (a) Who are the stakeholders in this decision and who, among the stakeholders, is the decision maker? (b) The textbook states that economic decision-making problems can be classified into one of the following three categories: a. Fixed input; b. Fixed output; c. Neither input not output fixed. To which category does the problem belong? Briefly explain why. (c) Which option is best if the customer plans to travel 150 miles with the rental car? (d) Which option is best if the customer plans to travel 250 miles with the rental car? (e) Which option is best if the customer plans to travel 350 miles with the rental car?
1. As a courtesy to its customers, a car rental agency ensures that each car it rents comes with a full tank of gas.
In turn, the customer must choose—at the time the car is rented—one of the following three options
(alternatives) for returning the car at the end of the rental period:
A. Return the car with a full tank of gas.
B. Return the car with less than a full tank and pay $5.00 per gallon to have the agency refill it.
C. Accept a flat price of $45 for gas, regardless of how much gas is in the tank when returned.
Suppose a customer rents a car and wants to select the most economical refueling option. The car has a 16-
gallon gas tank and, on the average, can travel 25 miles per gallon of gas. And, if needed, the cost of gas in the
area where the customer will be renting and using the car is $3.50 per gallon.
(a) Who are the stakeholders in this decision and who, among the stakeholders, is the decision maker?
(b) The textbook states that economic decision-making problems can be classified into one of the following
three categories:
a. Fixed input;
b. Fixed output;
c. Neither input not output fixed.
To which category does the problem belong? Briefly explain why.
(c) Which option is best if the customer plans to travel 150 miles with the rental car?
(d) Which option is best if the customer plans to travel 250 miles with the rental car?
(e) Which option is best if the customer plans to travel 350 miles with the rental car?
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