Tom is restoring a car and has already spent $3500 on the restoration.He expects to be able to sell the car for $5000.Tom discovers that he needs to do an additional $2000 of work to make the table worth $5000 to potential buyers.He could also sell the car now,without completing the additional work,for $2800.What should he do?
A) He should sell the car now for $2800.
B) He should keep the car since it wouldn't be rational to spend $5500 restoring a car and then sell it for only $5000.
C) He should complete the additional work and sell the car for $5000.
D) It does not matter which action he takes since the outcome will be the same either way.

Question

Quizplus · Accepted Answer

If Tom sells the car now without completing the additional work, he will only receive $2800, which is much less than the $5000 he was planning to sell it for. Therefore, option A is not a good choice.
If Tom keeps the car, he will not be able to recover the $3500 he has already spent on the restoration. Therefore, option B is not a good choice.
Completing the additional work for $2000 will bring the total cost of restoration to $5500, but he can still sell the car for $5000, which will give him a profit of $500. Therefore, option C is the best choice.

Tom Is Restoring a Car and Has Already Spent $3500