Use the Following to Answer Questions

question 186

Multiple Choice

Use the following to answer questions:
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: in state 1 their cars need no repairs and their income available for purchasing other goods and services is $50,000; in state 2 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) Look at the scenario Choosing Insurance. The premium on a fair insurance policy for the Ramirez family will be:

• A) $0.
• B) $900.
• C) $1,000.
• D) $2,000.

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Definitions:

Wells Serviced

The number of oil or gas wells maintained, repaired, or serviced by a company over a specific period.

Activity Variances

Differences between expected and actual costs or revenues, often associated with specific activities or operations within a business.

Flights

Scheduled air services transporting passengers or cargo from one location to another.

Passengers

Individuals who utilize transportation services such as buses, trains, airlines, or other modes of transit.