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Carol wants to buy a plot of land for $100,000 however she cannot decide whether she wants to build a small one story house on it or a large two-story house on it.


Why should Carol build the smaller house that will cost less assuming she wants to spend as little money as possible?




A: since the cost of the land is variable Carol can maximize her use of it by building the smaller house



B: since the cost of the land is high Carol can increase the demand for it by building the smaller house.


C: Since the cost of the land is fixed Carol can limit the variable cost of construction is by building the smaller house



D: since the cost of the land is low Carol can decrease the trade-offs she must make by building the smaller house.



help please!!!

Respuesta :

ablazeneed

The correct answer is "A".

The land is an asset that does not depreciate. On the contrary, its value tends to rise over time. If Carol decides to buy a small house, she will benefit in two ways:

  • She will spend less on materials that will depreciate (lose value) over time.
  • She can benefit by leasing or even selling land in the mid-term, making a profit as the value of that portion of her property will be higher than what it is now.

Answer:

C.) Since the cost of the land is fixed, Carol can limit the variable cost of construction by building the smaller house.

Explanation:

I took the test and this is the correct answer.