EXERCISE 3.2

The Matching Principle: You as a Driver

The purpose of this exercise is to demonstrate the matching principle in a familiar setting. Assume that you own a car that you drive about 15,000 miles each year.

1. List the various costs to you associated with owning and operating this car. Make an estimate of the total annual cost of owning and operating the car, as well as the average cost per mile that you drive.

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2. Assume also that you have a part-time job. You usually do not use your car in this job, but today your employer asks you to drive 100 miles (round-trip) to deliver some important documents. Your employer offers to reimburse you for your driving expenses.

   You already have a full tank of gas, so youYou already have a full tank of gas, so you are able to drive the whole 100 miles without stopping and you dont actually spend any money during the trip. Does this mean that you have incurred no expenses for which you should be reimbursed? Explain.