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ID: 1111360 • Letter: S
Question
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swo: Ybuonto a used ar lot to buy your first car. However, you are not sure about the quality of the cars in the lot and expect one-third of them to be of poor quality Rafer to the scenanio above. Suppose you decide to buy a Toyota willing to pay for the car? Corolla. You value the car for $10,000. You don't know it, but the car dealer values it for $8,500. If you have a zero value for poor-quality cars, what is the most that would you be OA $10.000 B. $6,666.67 C $3,000.50 O D. $5,000Explanation / Answer
you will be willing to pay
=(2/3)*10000+(1/3)*0
=6666.67
the above is the answer. I have used probability based expected value where we know for poor quality value is zero and probability is 1/3.