2. Consider the following costs of owning and operating a car. A $25,000 Ford Taurus financed over 60 months at 7 percent interest has a monthly payment of $495.03. Insurance costs $100 per month no matter how much you drive. The car gets 20 miles per gallon and uses unleaded regular gasoline that costs $3.50 per gallon. Finally, suppose that wear and tear on the car costs about 15 cents per mile. a. Which costs are fixed b. Which costs are variable? c. In deciding whether or not to drive from New York to Pittsburgh (about 1,000 miles round-trip) to visit a friend, which costs should count?
2. Consider the following costs of owning and operating a car. A $25,000 Ford Taurus financed over 60 months at 7 percent interest has a monthly payment of $495.03. Insurance costs $100 per month no matter how much you drive. The car gets 20 miles per gallon and uses unleaded regular gasoline that costs $3.50 per gallon. Finally, suppose that wear and tear on the car costs about 15 cents per mile. a. Which costs are fixed b. Which costs are variable? c. In deciding whether or not to drive from New York to Pittsburgh (about 1,000 miles round-trip) to visit a friend, which costs should count?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:2. Consider the following costs of owning and operating a car. A $25,000 Ford Taurus financed
over 60 months at 7 percent interest has a monthly payment of $495.03. Insurance costs $100
per month no matter how much you drive. The car gets 20 miles per gallon and uses unleaded
regular gasoline that costs $3.50 per gallon. Finally, suppose that wear and tear on the car
costs about 15 cents per mile.
a. Which costs are fixed
b. Which costs are variable?
c. In deciding whether or not to drive from New York to Pittsburgh (about 1,000 miles
round-trip) to visit a friend, which costs should count?
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