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:

Merchandise Sold

The total quantity of goods that have been sold by a business within a particular period.

Understated Inventory

A situation where the recorded amount of inventory is less than the actual inventory on hand, leading to distorted financial statements.

Net Income

The company's total earnings following the deduction of all costs, taxes, and expenses from the overall revenue.

Inventory Management

The overseeing and controlling of the ordering, storage, and use of components that a company will use in the production of the items it will sell as well as the managing of quantities of finished products for sale.