ECONOMICS QUESTION- Which answer is true???

Question

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.

Answer 1

Financially, d would be correct, because either way he'd lose $1000 - since this is an econ class, that's most likely the answer they are looking for. In reality, b would be the logical thing to do since he has nothing to gain by doing the extra work.

Answer 2

d. No matter what he does now, he will lose $1000.

But, the question begs the issue of the work involved. Does he enjoy working on projects like this, or does he want to minimize his opportunity cost. What was his purpose in buying the car initially?

Answer 3

I would consider spending the additional $3k and sell the car for it's cost plus that much.

Answer 4

The logical answer, to me, would be true. People or government should make/take in more money than they spend. But, as another pointed out, this could be a trick question.

Answer 5

b sell the car as is without the final repair to the motor because the buyer might want the original motor or a bigger block engine in the pony............or he can sell it on ebay....its all in the eyes of the beholder...........

Answer 6

b