Mike Wants to Buy a Used Car from Jim

question 127

Multiple Choice

Mike wants to buy a used car from Jim.Jim wants to sell his car for $5,600.Before buying the car,Mike wants to take the car to a mechanic,for a complete inspection.Mike estimates the costs for this inspection at $50 and his expected benefits at $60.What should Mike do and why?

• A) Take the car to the mechanic because the expected benefit is lower than the expected cost.
• B) Buy the car because Jim is a friend and he would never sell a 'lemon'
• C) Don't take the car to the mechanic because expected benefit is lower than the expected cost.
• D) Take the car to the mechanic because the expected benefit is greater than the expected cost.
• E) Don't take the car to the mechanic because expected benefit is greater than the expected cost

---

Definitions:

Profit Center

A part of an organization that is directly responsible for generating its own revenue and profits.

Fixed Assets

Long-term tangible assets, such as buildings, machinery, and equipment, used in operating a business and not expected to be converted to cash in the current or next fiscal year.

Yearly Income

The total amount of income generated by a person or entity in one fiscal year.

Return On Investment

A measure used to evaluate the efficiency or profitability of an investment, calculated by dividing the net profit from an investment by the original capital cost.