Stephen is restoring a car and has already spent $4,000 on the restoration. He expects to be able to sell the car for $5800 . Stephen discovers that he needs to do an additional $2,400 of work to make the car worth $5,800 to potential buyers. He could also sell the car now, without completing the additional work, for $3,800 . What should he do?
a. He should sell the car now for $3,800.
b. He should keep the car since it wouldn't be rational to spend $6,400 restoring a car and then sell it for only $5,800.
c. He should complete the additional work and sell the car for $5,800.
d. It does not matter which action he takes since the outcome will be the same either way.
a
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What will be an ideal response?
Consider the straight-line demand curve illustrated in the above figure. At what price is total revenue maximized?
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