Scenario: Choosing Insurance the Ramirez Family Owns Three Cars and Is

question 80

Multiple Choice

Scenario: Choosing Insurance The Ramirez family owns three cars and is considering buying insurance to cover the cost of repairs.They face two possible states: state 1, in which their cars need no repairs and their income available for purchasing other goods and services is equal to $50,000; and state 2, in which their cars need $10,000 worth of repairs and their income available for purchasing other goods and services is reduced to $40,000.The probability of repairs is 10%, while the probability of no repairs is 90%.
(Scenario: Choosing Insurance) Refer to the information in the scenario Choosing Insurance.The Ramirez family can buy insurance that will cover the full cost of repairs for $900.If family members are risk-averse and maximize their expected utility:

• A)they will buy the insurance.
• B)they will be indifferent between buying and not buying the insurance, since their expected income for purchasing other goods and services is $49,000, regardless of what they do.
• C)they will not buy the insurance, since buying it does not increase their expected income for purchasing other goods and services.
• D)they will self-insure.

Understand the concepts of variability within data sets, including variance and standard deviation.

Determine the appropriate measures of central tendency and dispersion for different types of data.

Understand and apply the concepts of skewness in the distribution of data.

Analyze and compare data across multiple groups or categories.

---

Definitions:

Magnitude and Direction

Magnitude and direction describe the strength and the pathway (positive or negative) of a relationship or effect observed within a dataset.

Mann-Whitney U

A nonparametric test that compares differences between two independent groups on a single, continuous variable.

Wilcoxon Rank

The Wilcoxon Rank Sum Test or Wilcoxon Signed Rank Test is a non-parametric statistical hypothesis test used to compare two paired samples to assess whether their population mean ranks differ.

Critical Value

The value resulting from application of a statistical test that is necessary for rejection (or nonacceptance) of the null hypothesis.