Blauvelt Electronics Corporation Has Developed a New Instrument-Model GZ-29-That Has

question 200

Multiple Choice

Blauvelt Electronics Corporation has developed a new instrument-model GZ-29-that has been designed to outperform a competitor's best-selling instrument. Model GZ-29 has a useful life of 30,000 hours of service and its operating cost is $3.20 per hour.In contrast, the competitor's product has a useful life of 10,000 hours of service and has operating costs that average $5.60 per hour. The competitor's instrument sells for $149,000. Blauvelt has not yet established a selling price for model GZ-29.From a value-based pricing standpoint what is GZ-29's economic value to the customer over its 30,000 hour useful life?

• A) $519,000
• B) $370,000
• C) $205,000
• D) $245,000

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Definitions:

Type II Error

The error occurs when the null hypothesis is not rejected when it is actually false.

Null Hypothesis

The null hypothesis is a statement in statistical inference that suggests there is no significant effect or no difference, serving as the default assumption to be tested.

Type I Error

The mistake of rejecting the null hypothesis when it is actually true, commonly referred to as a "false positive".

Beta

A symbol often representing the type II error rate in hypothesis testing, or a measure of risk exposure in finance.