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Question: Stan Moneymaker has been shopping for a new car. He is interested in a certain 4-cylinder sedan that averages 28 miles per gallon. But the salesperson tried to persuade Stan that the 6-cylinder model of the same automobile only costs $2,500 more and is really a "more sporty and responsive" vehicle. Stan is impressed with the zip of the 6-cylinder car and reasons that $2,500 is not too much to pay for the extra power. How much extra is Stan really paying if the 6-cylinder car averages 22 miles per gallon? Assume that Stan will drive either automobile 100,000 miles, gasoline will average $4.00 per gallon, and maintenance is roughly the same for both cars. State other assumptions you think are appropriate.

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M92314162

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