Question

Your car needs to be repaired. You have already paid 500 to have the transmission fixed, but it still doesn't work properly. You can sell your car "as is" for 2000. If your car were fixed, you could sell it for 2500. Your car can be fixed with a guarantee for another 300. Should you repair your car? Why?

Answer 1

It is financially more beneficial to repair the car for an additional $300 and then sell it for $2500, as the net gain will be higher compared to selling it 'as is' for $2000.

Step-by-step explanation:

The student is presented with a decision-making problem that requires some cost-benefit analysis. If the car is sold 'as is' for $2000, they avoid further repair expenses.

However, if the car is repaired for an additional $300, it can be sold for $2500. The net gain from repairing the car and selling it would be $2500 - $300 (repair cost) - $500 (previous repair costs) = $1700. By not repairing, the net revenue from the car would be $2000 - $500 (previous repair costs) = $1500.

Therefore, financially, it would be more beneficial to repair the car and then sell it for the higher amount as long as the repair guarantees that the car will be in the condition to fetch the higher price.