Assume That Odds of a New Computer Requiring Any Type

question 168

Multiple Choice

Assume that odds of a new computer requiring any type of service in the first two years are less than 1 in 10,000,and the average cost of any computer service calls is only $120.However,Karen pays $300 for a 2-year service contract on her new computer.She explains that her peace of mind is well worth the cost of the contract.In this case,Karen's decision to purchase the service agreement appears to be based primarily on

• A) expected value.
• B) subjective utility.
• C) subjective probability.
• D) noncompensatory factors.

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Definitions:

Balance Sheet

An accounting document that outlines the assets, liabilities, and owners' equity of a company on a specific date.

Land

A fixed asset category representing the ownership of a physical parcel of the earth's surface which is used in operations and has an indefinite useful life.

Working Capital

The difference between a company's current assets and current liabilities, indicating the short-term financial health and operational efficiency of the company.

Inventory

The total value of a company's raw materials, work-in-progress, and finished goods that are considered assets on a balance sheet.