Scenario: Tom Wants to Buy a Used IPhone from an Online

question 53

Multiple Choice

Scenario: Tom wants to buy a used iPhone from an online exchange Web site. He expects 50 percent of the used phones to have some defect. He is willing to pay up to $80 for a phone without any defect and $0 for a defective phone. An owner of a good-quality iPhone is likely to sell his phone if he gets a price of $70.
-Refer to the scenario above.In this case,how much should Tom pay for a used iPhone?

• A) $80
• B) $40
• C) $60
• D) $0

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Definitions:

Significance Level

The threshold of probability below which a null hypothesis is rejected in statistical tests, representing the risk of a Type I error.

Confidence Level

The degree of certainty or probability that a parameter lies within a specified range of values.

Estimating Procedure

A systematic method used to predict or calculate the likely amount, size, cost, or duration of something with incomplete information.

Engine

A machine designed to convert energy into useful mechanical motion, often found in vehicles, machinery, and various equipment.