Suppose that in addition to the costs in Problem 4, you have already committed to paying $100 to your mechanic for parts she has ordered.
a. Write out your cost function mathematically and graph it.
b. What is your best choice?
c. Suppose your mechanic tells you that she can return the parts she has ordered and you wouldn't need to pay the $100 if you do no repair work. What is your cost function now? What is your best choice? Now if you get no repair work, you can avoid paying the $100 - it is no longer a sunk cost. Look at Read More Online 3.4 and try using the two-step procedure described in the Appendix to find your best choice.
d. How would your answers to parts (a)-(c) change if the cost the parts your mechanic ordered had been $200?