Frank is considering transportation modes to a client's office. He can drive his own car, at an incremental cost of $0.75 per kilometre, or take a company car. If he takes his own car, he can be reimbursed $0.55 per kilometre. If Frank makes his decision strictly from his personal economic point of view, what is the relevant net cost associated with driving his own car?
A) $0.75
B) $0.20
C) $0.55
D) $0.00

Question

Quizplus · Accepted Answer

The relevant net cost of driving his own car is the incremental cost ($0.75) minus the reimbursement rate ($0.55), which equals $0.20 per kilometre.

Frank Is Considering Transportation Modes to a Client's Office