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

question 121

Multiple Choice

Alex, who is risk-neutral, is looking for an 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. Suppose Alex is risk-neutral. If the cost to Alex of searching for another apartment is $30, then will he search for another apartment?

• A)No, because searching for another apartment is a less-than-fair gamble.
• B)Yes, because searching for another apartment is a better-than-fair gamble.
• C)No, because searching for another apartment is a fair gamble.
• D)Yes, because searching for another apartment is a fair gamble.

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Definitions:

Organizational Response

The way an organization reacts to internal or external stimuli, challenges, or opportunities.

Technology Leader

An individual or organization pioneering in the development, utilization, and application of new technologies, setting trends in the industry.

Management By Objectives (MBO)

A management strategy where objectives are defined so that employees understand what they need to achieve.

Type Of Uncertainty

Refers to different situations in which the probability of outcomes or future events is unknown, common in business and economics.