Taylor considers buying engine oil that saves 60 cents per 20 miles, costs $35, and there is a $10 coupon. Is it worthwhile to buy the oil?

• A. It depends on gas price
• B. Only if coupon is $20 off
• C. No
• D. Yes

Answer: (C)

The main idea is to compare the upfront cost with the long-term savings you get from using the oil. After applying the coupon, the out-of-pocket cost is 25 dollars. The oil saves 60 cents for every 20 miles, which is a saving rate of 0.60/20 = 0.03 dollars per mile (3 cents per mile).

To break even on the 25-dollar cost, you’d need 25 / 0.03 ≈ 833 miles of driving. If you expect to drive fewer than about 830–835 miles with this oil in the relevant time frame, you wouldn’t recoup the investment, so it isn’t worthwhile. If your driving would exceed that distance, it would eventually become worthwhile. Since the provided answer is no, this reflects the assumption that the driving horizon is not long enough to reach the break-even point.