J
Jessica
Guest
2. In February, two tires on Kristen's car went flat. She paid her mechanic $200 to replace the tires. In March, Kristen's mechanic told her that she needs a new battery, which will cost $100. Kristen can replace the battery for $100 or she can buy a new used car for $1,000.
Which of the following should NOT affect her decision to replace the battery or buy a new used car?
A. The $200 she already spent on fixing the tires
B. The $100 cost of a new battery
C. The $1,000 cost of a new used car
I think A but I'm not sure.
3. Donald owns and manages a 30-floor office building in a thriving downtown location. In the current year, this building is making an accounting profit for Donald: That is, the explicit costs of maintaining the building (utilities, taxes, janitorial staff, etc.) are less than the revenue Donald collects from the business tenants.
At the end of this same year, Donald decides to sell the building and invest the money in a bank. Assume that Donald is a rational economic decision maker who cares primarily about the amount of income he can earn. Which of the following could explain his behavior?
A. He finds out that the interest he can earn by depositing his money in a bank is much higher than it was previously.
B. Neither of these reasons explains his behavior.
C. He discovers he paid 10% more than the market price for the building when he bought it 10 years ago, but has no way to recover his overpayment.
Which of the following should NOT affect her decision to replace the battery or buy a new used car?
A. The $200 she already spent on fixing the tires
B. The $100 cost of a new battery
C. The $1,000 cost of a new used car
I think A but I'm not sure.
3. Donald owns and manages a 30-floor office building in a thriving downtown location. In the current year, this building is making an accounting profit for Donald: That is, the explicit costs of maintaining the building (utilities, taxes, janitorial staff, etc.) are less than the revenue Donald collects from the business tenants.
At the end of this same year, Donald decides to sell the building and invest the money in a bank. Assume that Donald is a rational economic decision maker who cares primarily about the amount of income he can earn. Which of the following could explain his behavior?
A. He finds out that the interest he can earn by depositing his money in a bank is much higher than it was previously.
B. Neither of these reasons explains his behavior.
C. He discovers he paid 10% more than the market price for the building when he bought it 10 years ago, but has no way to recover his overpayment.