Jackson Just Took Out a $1,000 Loan to Buy a 1979

question 66

Multiple Choice

Jackson just took out a $1,000 loan to buy a 1979 Corvette and he needs to travel to Vancouver this summer.He can either drive his car or take a bus.In order to make a rational decision,he decides to calculate the costs of driving the car on the trip.He estimates the cost of gas at 10 cents per kilometre,the car repair shop estimates maintenance at 3 cents per kilometre,his car insurance costs $600 for 6 months,and from a Web site,he determines that depreciation is about $1 per kilometre.
-Which of the above costs are sunk cost and,therefore,should NOT be included in his analysis?

• A) Maintenance,depreciation,insurance and loan payment costs.
• B) Maintenance,depreciation and insurance costs.
• C) Depreciation,insurance and loan payment costs.
• D) Insurance and loan payment costs.
• E) The cost of the car.

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