Alex, Who Is Risk-Neutral, Is Looking for a One-Bedroom Apartment

question 79

Multiple Choice

Alex, who is risk-neutral, is looking for a one-bedroom apartment to rent for the month of August while he's on vacation in Seattle. All of the one-bedroom apartments in the neighborhood where he wants to stay are of equal quality, but 70 percent rent for $700 per month, 20 percent rent for $600 per month, and 10 percent rent for $500 per month. The first apartment Alex finds rents for $700 per month. If the cost to Alex of searching for an apartment is $30, then searching for another apartment is a gamble with an expected value of:

• A)$0.
• B)$10.
• C)$20.
• D)$40.

---

Definitions:

Dead Stock

Unsold goods that have been in inventory for a long time and are not expected to be sold due to their obsolescence or lack of demand.

Supplier Relationships

Supplier relationships pertain to the interactions and dealings between a business and its suppliers, involving the negotiation of terms, management of supply, and collaboration for mutual benefit.

Inventory

The total amount of goods or materials held in stock by a company or business.

Original Value

The initial monetary worth of an asset or investment at the time of its purchase or acquisition.