A Car Owner Must Decide Whether She Should Take Out

question 17

Multiple Choice

A car owner must decide whether she should take out a $100-deductible collision policy in addition to her liability insurance policy. Records show that each year, in her area, 17% of the drivers have an accident that is their fault or for which no fault is assigned, and that the average cost of repairs for these types of accidents is $1200. If the $100-deductible collision policy costs $100 per year, would she save money in the long run by buying the insurance or "taking the chance"? (Hint: Find the expected values if she has the policy and if she doesn't have the policy and compare them.) ​

• A)by buying the insurance
• B)by taking the chance

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Definitions:

Formal Systems

Structured, rule-based procedures and methodologies established for consistent operation within organizations.

Work Processes

The tasks, procedures, and routines that are carried out to accomplish work objectives in an organization.

Structured Coordination

The deliberate arrangement and management of tasks, efforts, and communication within an organization to achieve coherence and efficient collective action.

Workarounds

Informal solutions or methods used to overcome problems or limitations in procedures or systems.