You Can Choose to Buy an Extended Warranty for Your

question 78

Multiple Choice

You can choose to buy an extended warranty for your computer for $200. During this period, you will experience either a minor ($100) or major ($500) repair bill. If you buy the warranty, you pay 50% of any repair bill: that is, you will pay either $50 or $250 for the subsequent repair. Assume the company wants to make as much money as possible, and you wish to spend as little as possible. Which of the following is a true statement?

• A) This game has no saddlepoint.
• B) This game has a saddlepoint; the value of the game is $200.
• C) This game has a saddlepoint; the value of the game is $250.
• D) This game has a saddlepoint; the value of the game is $450.

---

Definitions:

Good

A tangible product or service that can satisfy consumers' wants or needs.

Optimum

The most favorable condition or level that achieves the best possible outcome or efficiency.

Good X

A placeholder term for any specific good, product, or item within economic analysis.

Good Y

A hypothetical product or item, often used in economic models and theories to illustrate various economic principles and interactions.