Suppose You Value a Special Watch at $100

question 413

Multiple Choice

Suppose you value a special watch at $100. You purchase it for $75. On your way home from class one day, you lose the watch. The store is still selling the same watch, but the price has risen to $85. Assume that losing the watch has not altered how you value it. What should you do?

• A)Pay the $85 to buy the watch.
• B)Wait to see if the watch goes on sale. If the price drops to $75 or less, buy the watch.
• C)Wait to see if the watch goes on sale. If the price drops to $25 or less, buy the watch.
• D)Do not buy the watch.

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Definitions:

Long Run

A period of time in which all factors of production and costs are variable, allowing all aspects of an enterprise to be adjusted.

Appreciates

When the value of an asset, currency, or commodity increases in value over time in relation to other forms of currencies or commodities.

Peso

The currency used by several countries in Latin America, as well as the Philippines.

Hotel Room

A single unit of accommodation in a hotel, typically including a bed and bathroom, offered to guests for temporary stays.