RealWorldGraduation_Question_3 <– PDF
In 1979, a certain woman bought a large number of popular “collectible” dolls. It was commonly believed at that time that these dolls would increase in value over time, and as such, were considered by some to be a worthwhile investment. In fact, some were suggesting that a $5.00 doll purchased in 1979, if kept in its original packaging, would find buyers in 1999 (20 years later) at a price of $100.00 or more, far in excess of the effects of inflation. This means that these dolls were expected to increase in value about 16.1% per year (in so doing, their value would double every 4.47 years, and would be worth 20 times what they were purchased for at the end of 20 years). If the effects of inflation were also considered, the dolls would be expected to sell for a lot more in 1999.
However, in 1999, the woman who bought the dolls found that there was virtually no demand for them, other than their usual value as children’s toys. She has been offered $1.50 each by another collector, which will represent a considerable loss to her. What actions should be taken?
a) The woman should sell the dolls for $1.50 each, then sue the person who sold her the dolls in 1979 to recover the other $98.50 each (plus whatever extra is due owing to inflation).
b) The woman should sell the dolls for $1.50 each, then sue the person who sold her the dolls in 1979 for $3.50 each; that way, she at least recovers her investment.
c) This woman will have to take the loss, but the state or federal government should pass a law prohibiting the sale of “collectible” dolls.
d) Because collectibles always increase in value over the long run, she should hold onto them and make even more per doll than the original $100.00 estimate. Her inability to sell them at a profit now is only a temporary setback.
e) This was a case of questionable behavior by the original seller. This woman will have to take the loss. But, in order to prevent this from happening to other people, the state or federal government should pass a law requiring background checks and permits for anyone who manufactures or sells dolls.
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