Answer: d. be indifferent between (i) selling the car now and (ii) replacing the engine and then selling it.
Stan buys a 1966 Mustang for $2,000, planning to restore and sell the car. He goes on to spend $8,000 restoring the car. At this point he can sell the car for $9,000. As an alternative, he can spend an additional $3,000 replacing the engine. With a new engine the car would sell for $12,000. Stan should
a. complete the repairs and sell the car for $12,000.
b. sell the car now for $9, 000.
c. never try such an expensive project again.
d. be indifferent between (i) selling the car now and (ii) replacing the engine and then selling it.
Economics
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