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:

Return Rate

The profit or deficit experienced by an investment during a certain period, represented as a portion of the initial investment's value.

Market Economy

An economic system in which economic decisions and the pricing of goods and services are guided solely by the aggregate interactions of a country's citizens and businesses and not by government intervention.

Investment Project

A project undertaken by individuals, companies, or governments aiming at generating future profits through capital expenditure.

Political Authorities

The individuals or organizations that hold the power to govern or rule over a specific territory or population, making and enforcing laws and policies.