Macroeconomics DeShawn has spent $600 purchasing and repairing an old fishing boat, which he expects to sell for $900 once the repairs are complete. DeShawn discovers that, in addition to the $600 he has already spent, he needs to make an additional repair, which will cost another $400, in order to make the boat worth $900 to potential buyers. He can sell the boat as it is now for $400. What should he do?

Question

Kaitlyn Brewer

Business

27 November, 09:27

Macroeconomics DeShawn has spent $600 purchasing and repairing an old fishing boat, which he expects to sell for $900 once the repairs are complete. DeShawn discovers that, in addition to the $600 he has already spent, he needs to make an additional repair, which will cost another $400, in order to make the boat worth $900 to potential buyers. He can sell the boat as it is now for $400. What should he do?

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Answers (1)

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Litzy Robertson · Answer 1

The answer is: If he pays the extra $400 needed to complete the repairs, DeShawn will reduce his losses to $100 ($900 - $1,000). It is better than losing $200.

Explanation:

If DeShawn sells the boat now for $400 he will have lost $200. But if he decides to complete the repairs on the boat, investing the extra $400, and sells the boat for $900, he will have only lost $100.

If he pays the extra $400 needed to complete the repairs, DeShawn will reduce his losses to $100 ($900 - $1,000). It is better than losing $200.