A Purchasing Agent for a Trucking Company Is Shopping for Replacement

question 149

Multiple Choice

A purchasing agent for a trucking company is shopping for replacement tires for their trucks from two suppliers. The suppliers' prices are the same. However, Supplier A's tires have an average life of 100,000 km with a standard deviation of 10,000 km. Supplier B's tires have an average life of 100,000 km with a standard deviation of 2,000 km. Which of the following statements is true?

• A) The two distributions of tire life are the same
• B) On average, Supplier A's tires have a longer life then Supplier B's tires
• C) The life of Supplier B's tire is more predictable than the life of Supplier A's tires
• D) The dispersion of Supplier A's tire life is less than the dispersion of Supplier B's tire life
• E) The life of Supplier A's tire is more predictable than the life of Supplier B's tires

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Definitions:

Consumer Surplus

The variance between the sum consumers are inclined and can afford to pay for a good or service and the sum they genuinely pay.

Producer Surplus

Producer surplus is the difference between what producers are willing to sell a good for and the actual price they receive.

Total Surplus

The sum of consumer surplus and producer surplus in a market, representing the total benefits to society from the trading of goods or services.

Equilibrium Price

The market price at which the quantity of a good demanded equals the quantity supplied, leading to a stable market condition.