Stephen Is Restoring a Car and Has Already Spent $4,000

question 121

Multiple Choice

Stephen is restoring a car and has already spent $4,000 on the restoration.He expects to be able to sell the car for $5800.Stephen discovers that he needs to do an additional $2,400 of work to make the car worth $5,800 to potential buyers.He could also sell the car now,without completing the additional work,for $3,800.What should he do?

• A)He should sell the car now for $3,800.
• B)He should keep the car since it wouldn't be rational to spend $6,400 restoring a car and then sell it for only $5,800.
• C)He should complete the additional work and sell the car for $5,800.
• D)It does not matter which action he takes since the outcome will be the same either way.

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Definitions:

Governmental Intervention

Actions taken by a government to influence or regulate various aspects of its economy or society, often to correct market failures or promote social welfare.

Wage and Price Controls

Government-imposed limits on the prices that can be charged for goods and services and/or wages that can be paid, typically in an attempt to control inflation.

Tax Revenue

The funds governments accumulate from tax collection.

Tax Rates

The percentage at which an individual or corporation is taxed on their income or profits.