Assume That You Have a Riding Lawn Mower That Is

question 73

Multiple Choice

Assume that you have a riding lawn mower that is in need of repairs.You can choose to repair or replace it.You are interested in your net cost over the next two years.If you choose to repair,it will cost $300 and there is a 50/50 chance of whether or not it will need additional repairs within the next two years.If it does need additional repairs,there is a 40 percent chance of needing another $400 of repairs,and a 60 percent chance of needing another $200 of repairs.At the end of the two years you estimate that the repaired mower would be worthless. If you choose to replace the mower by trading in the old mower,the cost after deducting the trade in value is $1500.At the end of the two years you estimate there is a 75 percent chance you could resell it for $1000,and a 25 percent chance that you can resell it for $1300.
After folding back the tree which of the following is correct?

• A)Choose to repair for an expected cost of $300
• B)Choose to repair for an expected cost of $440
• C)Choose to replace for an expected cost of $275
• D)Choose to replace for an expected cost of $425

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Definitions:

Social Attachment

The emotional bond that forms between individuals, foundational in the development of personal relationships.

Opponent-process Theory

A psychological and neurological model that explains emotions and motivations as the result of opposite pairs of feelings or drives balancing each other.

Opponent-process Theory

A psychological and neurological model that describes how the perception of one emotional state can directly generate the opposite emotional response over time.

Thrill Seeking

The pursuit of activities that produce a rush of adrenaline, often involving risk or danger.