A Medical Doctor Is Involved in a $1 Million Malpractice

question 63

Multiple Choice

A medical doctor is involved in a $1 million malpractice suit.He can either settle out of court for $250,000 or go to court.If he goes to court and loses,he must pay $825,000 plus $175,000 in court costs.If he wins in court the plaintiffs pay the court costs.Identify the actions of this decision-making problem.

• A)Two choices: (1)go to court and (2)settle out of court.
• B)Two possibilities: (1)win the case in court and (2)lose the case in court.
• C)Four consequences resulting from Go/Settle and Win/Lose combinations.
• D)The amount of money paid by the doctor.

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Definitions:

Merchandising Company

A business that purchases finished goods for resale, making a profit on the merchandise sold.

Income Statement

A financial statement showing the revenue, expenses, and profits or losses of a business over a particular period.

Freight-In

Freight-In costs are the shipping charges for receiving goods from suppliers, considered part of the inventory cost and included in the cost of goods sold when the inventory is sold.

Purchases Account

A ledger account used to record the amounts spent on acquiring inventory for resale or raw materials for production, excluding any direct labor or overhead costs.