Rick buys an old Mustang for $3,000, planning to restore and sell the car. He goes on to spend $9,000 restoring the car. At this point, he can sell the car for $10,000. As an alternative, he can spend an additional $3,000 replacing the engine. With a new engine, the car would sell for $13,000. Rick should O a. complete the repairs and sell the car for $13,000. O b. be indifferent between (i) selling the car now and (ii) replacing the engine and then selling it. O c. sell the car now for $10,000. O d. keep the car as it would not be rational to carry out the renovation.

Rick buys an old Mustang for $3,000, planning to restore and sell the car. He goes on to spend $9,000 restoring the car. At this point, he can sell the car for $10,000. As an alternative, he can spend an additional $3,000 replacing the engine. With a new engine, the car would sell for $13,000. Rick should O a. complete the repairs and sell the car for $13,000. O b. be indifferent between (i) selling the car now and (ii) replacing the engine and then selling it. O c. sell the car now for $10,000. O d. keep the car as it would not be rational to carry out the renovation.

Economics Today and Tomorrow, Student Edition

1st Edition

ISBN:9780078747663

Author:McGraw-Hill

Publisher:McGraw-Hill

Chapter5: Buying The Necessities

Section: Chapter Questions

Problem 19AA

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