Author Question: Refer to Scenario 5.5. Which of the following statements is true? A) The expected cost of not ... (Read 91 times)

DyllonKazuo · **on:** Jul 1, 2018

Refer to Scenario 5.5. Which of the following statements is true?

A) The expected cost of not fixing the car is less than the cost of fixing it.
B) The expected cost of not fixing the car is greater than the cost of fixing it.
C) It is not possible to tell whether the expected cost of fixing the car is less than the cost of fixing it, because the probabilities are subjective.
D) It is not possible to tell whether the expected cost of fixing the car is less than the cost of fixing it, because the probabilities are not equal.

Question 2

Suppose you only consume food and clothing, and clothing is plotted on the vertical axis. Also, you purchase food at a fixed price (PF), but the price of clothing declines as you buy in larger quantities (i.e., quantity discounts).

What does the budget line look like in this case? A) The budget line is a straight line
B) The budget line is now concave to (bows out from) the origin
C) The budget line is now convex to (bows in toward) the origin
D) The budget line will not be a straight line, but it may be concave or convex