Mel Is Thinking of Going on a Cruise

question 79

Multiple Choice

Mel is thinking of going on a cruise. Mel values a cruise in nice weather at $2,000 and values a cruise in bad weather at $50. The probability of nice weather is 60% and the probability of bad weather is 40%. Trip insurance is sometimes available. If purchased, it allows travelers to delay the cruise until the weather is nice. Suppose that the price of the cruise is $1,200. If Mel is risk-neutral, then Mel should:

• A)not buy trip insurance.
• B)only buy trip insurance if it costs less than $780.
• C)only buy trip insurance if it costs less than $20.
• D)only buy trip insurance if it costs less than $50.

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Definitions:

Research Hypothesis

A specific, testable prediction about what you expect to happen in your study, often regarding the relationship or effect of variables.

One-Tailed Test

A directional test, reflecting a directional hypothesis.

Two-Tailed Test

A nondirectional test, reflecting a nondirectional hypothesis.

Null Hypothesis

A statement in statistics that there is no effect or no difference, serving as the starting point for hypothesis testing.