Mel Is Thinking of Going on a Cruise

question 136

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.According to a very reliable source,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.
A gamble that offers a 1% chance of winning $699.93 and a 99% chance of losing $7.07 would be classified as a(n)

• A)better than fair gamble.
• B)gamble that only a risk-seeker would take.
• C)fair gamble.
• D)unfair gamble.

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Definitions:

Producer's Risk

Producer's risk is the probability of rejecting a quality product during the inspection process, falsely identifying it as defective.

Consumer's Risk

The probability of accepting a lot or batch of goods that contains a greater number of defects than a predetermined level, leading to consumer dissatisfaction.

Acceptance Sampling

A statistical quality control method where a random sample of items from a lot is tested to determine the acceptance or rejection of the entire lot.

Bad Lots

Refers to batches of goods or products that do not meet the quality standards set by the manufacturer or industry.