Suppose you value a special watch at $100. You purchase it for $75. On your way home from class one day, you lose the watch. The store is still selling the same watch, but the price has risen to $85. Assume that losing the watch has not altered how you value it. What should you do?
A)Pay the $85 to buy the watch.
B)Wait to see if the watch goes on sale. If the price drops to $75 or less, buy the watch.
C)Wait to see if the watch goes on sale. If the price drops to $25 or less, buy the watch.
D)Do not buy the watch.

Question

Quizplus · Accepted Answer

Since you value the watch at $100 and are willing to pay up to that value for it, it makes sense to purchase it again at the current price of $85. It is still worth more to you than what you are paying for it. Waiting for the price to drop again may not be worth the risk of missing out on an item you value.

Suppose You Value a Special Watch at $100