In Acceptance Sampling, the Risk of Accepting a Poor Quality

question 67

Multiple Choice

In acceptance sampling, the risk of accepting a poor quality lot is known as:

• A) consumer's risk.
• B) producer's risk.
• C) a Type I error.
• D) None of these alternatives is correct.

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Definitions:

Substitution Effect

(1) A change in the quantity demanded of a consumer good that results from a change in its relative expensiveness caused by a change in the good’s own price. (2) The reduction in the quantity demanded of the second of a pair of substitute resources that occurs when the price of the first resource falls and causes firms that employ both resources to switch to using more of the first resource (whose price has fallen) and less of the second resource (whose price has remained the same).

Product Quality

Refers to the characteristics and features of a product that contribute to its ability to meet given requirements or expectations.

Budget Constraint

The limit that the size of a consumer’s income (and the prices that must be paid for goods and services) imposes on the ability of that consumer to obtain goods and services.

Money Income

The total amount of monetary earnings received by an individual or household over a certain period of time, before taxes and deductions.