|
1. |
My wife and I decided to have a guest room constructed at the back of our property. Our cost estimate came out to $16,000, and we estimated the benefits to us (from use and enhanced property value) to be $20,000. Suppose that, after spending $8,000 on construction, an earthquake destroyed much of the work, leaving us in a position of having to spend $13,000 to finish the guest room, for a total cost of $21,000. Suppose that our builders offered to tear down the structure free of charge in exchange for whatever materials they could salvage if we decided not to finish the guest room. | |
| Question: Should we have completed the guest room or have
had it torn down?
|
||
| 2. | Bill and Joe live in Ithaca, New York. At 2 P.M. Bill goes to the local Ticketron outlet and buys a $30 ticket to a basketball game to be played that night in Syracuse (50 miles north). Joe plans to attend the same game, but doesn't purchase his ticket in advance because he knows from experience that it is always possible to buy just as good a seat at the arena. At 4 P.M. a heavy, unexpected snowstorm begins, making the prospect of the drive to Syracuse much less attractive than before. | |
| Question: If
both Bill and Joe have the same tastes and are rational, is one of them more
likely to attend the game than the other? Why or why not?
|
||