John and Edward Are Negotiating the Sale and Purchase of One

question 55

Multiple Choice

John and Edward are negotiating the sale and purchase of one of John's very expensive paintings.In the course of the negotiations,John says,"I'll sell it to you for $20 000.00,to which Edward replies,"That is a little too much for me; I'll give you $14 500.00." John thinks about this for a moment and says,"No,but I'll take $17 500.00.Edward says,"That is still too much; I'll buy it for $15 500.00.John looks at the painting and replies,"You know it is worth more than that.Why don't you give me $16 500.00 and we'll call it a day." Edward responds with,"I only have $16 000.00 so that is all I will pay for it," to which John replies,"Done." In this case

• A)the contract is for $16 500.00.
• B)the contract is for $17 500.00.
• C)the contract is for $14 500.00.
• D)there is no contract at all.
• E)the contract is for $16 000.00.

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Definitions:

Disjoint Events

Two events that cannot happen at the same time, meaning they have no outcomes in common.

Conditional Probability

The likelihood of an event or outcome occurring, given that another event has already occurred.

Given Event

An occurrence or outcome within a probability space that has a specified probability attached to it.

Independent Events

Two or more events whose outcomes do not affect each other, meaning the occurrence of one event does not change the probability of the other.