Howard Send is deciding whether to keep his car when he moves to New York City.To operate his car for a year, he would have to pay a flat fee of $6,000 for auto insurance and parking, plus $.20 for every mile that he drives for gasoline and repairs.Alternatively, he could give his car to his brother-in-law in Buffalo (the market value of the car is negligible)and take taxicabs in New York, which cost $1 a mile.Howard knows that if he took the car to New York he would drive 6,500 miles per year.If he places no value, positive or negative, on his brother-in-law's getting the car and if he is indifferent between riding a cab and driving, he should

A)keep his car if he wouldn't want to travel as much as 6,500 miles by cab.
B)give his car away if he wouldn't travel more than 6,000 miles by cab but keep it if he would travel more than 6,000 miles by cab.
C)keep his car if he would travel more than 6,000 but less than 6,500 miles by cab.
D)give his car away.
E)There is not enough information given here to allow one to give him reasonable advice about what to do.

Question

Howard Send is deciding whether to keep his car when he moves to New York City.To operate his car for a year, he would have to pay a flat fee of $6,000 for auto insurance and parking, plus $.20 for every mile that he drives for gasoline and repairs.Alternatively, he could give his car to his brother-in-law in Buffalo (the market value of the car is negligible) and take taxicabs in New York, which cost $1 a mile.Howard knows that if he took the car to New York he would drive 6,500 miles per year.If he places no value, positive or negative, on his brother-in-law's getting the car and if he is indifferent between riding a cab and driving, he should

A)keep his car if he wouldn't want to travel as much as 6,500 miles by cab.
B)give his car away if he wouldn't travel more than 6,000 miles by cab but keep it if he would travel more than 6,000 miles by cab.
C)keep his car if he would travel more than 6,000 but less than 6,500 miles by cab.
D)give his car away.
E)There is not enough information given here to allow one to give him reasonable advice about what to do.

Quizplus · Accepted Answer

If Howard gives his car to his brother-in-law and takes cabs, he would spend $6,500 in cab fares ($1 per mile for 6,500 miles). Keeping his car would cost him a flat fee of $6,000 plus $1,300 in gasoline and repairs (6,500 miles x $0.20 per mile). Therefore, giving his car away is a more economical option for Howard.

Howard Send Is Deciding Whether to Keep His Car When