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:

Corporations

Legal entities formed by individuals, shareholders, or stakeholders, with rights and duties distinct from those of its members, and recognized as such by law.

Preincorporation Contracts

Agreements entered into by the promoters of a company on its behalf before the company has been legally formed.

Promoters

Individuals or groups who initiate and assist in the formation and organization of a corporation, often engaging in securing capital, compliance with legal requirements, and bringing together the initial management.

Passive Investor

An individual or entity that invests in stocks, bonds, or other investments without taking an active role in the management or their investment decisions.