Question

Suppose you value a special watch at $100. You purchase it for $75. On your way home from class one day, you lose the watch. The store is still selling the same watch, but the price has risen to $85. Assume that losing the watch has not altered how you value it. What should you do?

A) Wait to see if the watch goes on sale. If the price drops to $25 or less, buy the watch.
B) Pay the $85 to buy the watch.
C) Wait to see if the watch goes on sale. If the price drops to $75 or less, buy the watch.
D) Do not buy the watch.

Answer 1

Answer: If losing the watch has not altered how we value the watch, then we'll pay the $85 to buy the watch.

We'll pay $85 to buy the watch. since the value of the watch has not been altered and we still value it as the same even after loosing it. Here we are at a surplus of $15 after buying it at a price of $85.

Therefore, We should buy it. The correct option is (b)