Use the Following to Answer Questions

question 129

Multiple Choice

Use the following to answer questions :
Scenario: Health Costs
Alan is hoping for a healthy year,meaning that he would have zero health costs.Given his habits,there is a 40% chance that Alan will develop a health issue resulting in $50 000 in health costs.Assume these are the only two conditions that could exist for Alan in the coming year.
-(Scenario: Health Costs) Use Scenario: Health Costs.Given the fact that Alan has a 40% chance of developing a health problem,what is the expected value of Alan's health care costs for the coming year?

• A) $0
• B) $50 000
• C) $20 000
• D) $16 000

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Definitions:

Explicit Costs

Refers to direct monetary expenses businesses incur in their operations, such as wages, rent, and materials.

Normal Profit

Normal profit is the minimum amount of profit needed for a company to remain competitive in the market, covering all its opportunity costs.

Normal Profits

The level of profit that business owners consider satisfactory or "normal", essentially covering both explicit and implicit costs, including a normal rate of return on investment.

Accounting Profits

The total revenue of a business minus the explicit costs; it's the profit figure calculated according to generally accepted accounting principles.