A Truck, Costing $25,000 and Uninsured, Was Wrecked the Very

question 72

Multiple Choice

A truck, costing $25,000 and uninsured, was wrecked the very first day it was used. The truck can either be disposed for $5,000 cash and replaced with a similar truck costing $27,000, or rebuilt for $20,000 and be "new" as far as operating characteristics and looks are concerned. The net relevant cost of the replacing option is:

• A) $5,000.
• B) $20,000.
• C) $22,000.
• D) $25,000.
• E) $27,000.

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Definitions:

Taxable Income

The amount of income that is used to calculate how much tax an individual or a company owes to the government.

Progressive

Referring to policies or tax rates that increase proportionally with the ability to pay, targeting a higher burden on wealthier entities or individuals.

Price Elasticity

A measure of how much the quantity demanded of a good responds to a change in the price of that good, often used to understand the sensitivity of demand in relation to price changes.

Excise Tax

A form of taxation applied on certain goods, services, or activities, often included in the price of products like gasoline, alcohol, and tobacco.