Mike wants to buy a used car from Jim.Jim wants to sell his car for $5,600.Before buying the car,Mike wants to take the car to a mechanic,for a complete inspection.Mike estimates the costs for this inspection at $50 and his expected benefits at $60.What should Mike do and why?
A) Take the car to the mechanic because the expected benefit is lower than the expected cost.
B) Buy the car because Jim is a friend and he would never sell a 'lemon'
C) Don't take the car to the mechanic because expected benefit is lower than the expected cost.
D) Take the car to the mechanic because the expected benefit is greater than the expected cost.
E) Don't take the car to the mechanic because expected benefit is greater than the expected cost

Question

Quizplus · Accepted Answer

Mike should take the car to the mechanic because the expected benefit of $60 is greater than the expected cost of $50. This way, he can identify any potential issues or repairs needed before purchasing the car and potentially save himself from expensive repairs in the future.

Mike Wants to Buy a Used Car from Jim