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
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
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.
sell the car now for $10,000.
keep the car as it would not be rational to carry out the renovation.
O c.
O d.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F368ea900-5ae7-4dd1-a719-a25c6400c48c%2F21e02057-7e81-44bf-a20d-6e149688464c%2F4uhcv3_processed.png&w=3840&q=75)
Transcribed Image Text: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.
sell the car now for $10,000.
keep the car as it would not be rational to carry out the renovation.
O c.
O d.
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