Bill Is Restoring a Car and Has Already Spent $4000

question 19

Multiple Choice

Bill is restoring a car and has already spent $4000 on the restoration.He expects to be able to sell the car for $6200.Bill discovers that he needs to do an additional $2400 of work to make the car worth $6200 to potential buyers.He could also sell the car now,without completing the additional work,for $3800.What should he do?

• A)He should sell the car now for $3800.
• B)He should keep the car since it wouldn't be rational to spend $6400 restoring a car and then sell it for only $6200.
• C)He should complete the additional work and sell the car for $6200.
• D)It does not matter if Bill sells the car now or completes the work and then sells it at the higher price because the outcome will be the same either way.

Calculate total demand in a market based on individuals' demand functions and population.

Evaluate the effects of market composition on total demand for a good.

Understand the concept of revenue maximization for firms and calculate optimal pricing.

Apply knowledge of utility functions to predict consumer choices under budget constraints.

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Definitions:

Earnings Before Interest And Taxes

A measure of a firm's profitability that includes all income and expense items except interest and income tax expenses.

Installation Cost

The expense associated with setting up or putting equipment, infrastructure, or software into operation.

Erosion Cost

Costs that occur when a new project or investment negatively affects the revenues or profits of existing projects or investments.

Class A Spa

An upscale facility offering premium health and beauty treatments, differentiated by service, amenities, or exclusivity criteria.