Frank is considering transportation modes to a client's office. He can drive his own car, at an incremental cost of $0.55 per kilometre, or take a company car. If he takes his own car, he can be reimbursed $0.45 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) $0.10
B) $0.45
C) $0.55
D) Some other amount

Question

Quizplus · Accepted Answer

The relevant net cost is the incremental cost of driving his own car minus the reimbursement he can get. So, the net cost is $0.55 - $0.45 = $0.10.

Frank Is Considering Transportation Modes to a Client's Office