Multiple Choice$2,500$3,000$4,000$4,500 Suppose that there are two types of cars, good and bad. The qualities of cars are not observable but are known to the sellers. Risk-neutralbuyers and sellers have their own valuation of these two types of cars as provided in the teble.Types of CarsGood (50% probability)Bad (50% probability)Buyer's ValuationSeller's Valuation5,0004,5003,0002,500Now suppose that sellers value a good car at $4,500 and a bad car at $2,500, and quality is not observed by the buyers. What is the highestprice that risk-neutral buyers will offer for a used car if they recognize adverse selection?

Buyer values good type of cars at $5,000. Buyer values bad type of cars at $3,000. The probability…

Answered: Suppose that there are two types of…

A First Course in Probability (10th Edition)

10th Edition

ISBN:9780134753119

Author:Sheldon Ross

Publisher:Sheldon Ross

Chapter1: Combinatorial Analysis

Section: Chapter Questions

Problem 1.1P: a. How many different 7-place license plates are possible if the first 2 places are for letters and...

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You purchase a brand new car for $15,000 and insure it. The policy pays 78% of the car's value if there is an issue with the engine or 30% of the car's value if there is an issue with the speaker system. The probability of an issue with the engine is 0.009, and the probability there is an issue with the speaker system is 0.02. The premium for the policy is p. Let X be the insurance company's net gain from this policy. (a) Create a probability distribution for X, using p to represent the premium on the policy. Enter the possible values of X in ascending order from left to right. P(X) (b) Compute the minimum amount the insurance company will charge for this policy. Round your answer to the nearest cent
Kindly answer it
If events A and B are independent, then P(A U B) = 0. True or false?
Virtually any process can be improved by use of statistics, including the law. A much publicized case that involved a debate about probability was the Collins case, which began in 1964. An incident of purse snatching in the Los Angeles area led to the arrest of Michael and Janet Collins. At their trial, an "expert" presented the probabilities listed in table below on characteristics possessed by a couple seen running from the crime scene: Characteristics Probability Man with beard 1/10 Blond woman 1/4 1/10 Yellow car Woman with ponytail Man with moustache Interracial couple 1/10 1/3 1/1000 The chance that a couple had all these characteristics together is 1 in 12 million. Because the Collinses had these characteristics, the Collinses must be guilty. Do yo see any problem with this line of reasoning? Hint: The question of interest is not "what is the probability of finding a couple with these characteristics?" because one such couple has been found (the Collinses), the question is "what…
The table below shows the probability of winning 0-5 dollars playing a game. Amount Won ($) 0 1 2 3 4 5 Probability 4/24 7/24 7/24 3/24 2/24 1/24 The stallholder charges $2.50 for each playing of the game. How much money can the stallholder expect to make for the charity on a day when there are 400 plays of the game?
John is having a dinner at a restaurant, which sells 3 kinds of dishes, A, B, and C. The probabilities of ordering each dish are 0.4, 0.3, and 0.3. Suppose the probability of John being satisfied after eating the dishes are 0.7, 0.5, and 0.6, respectively. Answer the questions below. 1) When John wasn’t satisfied with his dish, what is the probability that he has eaten the dish B? (Round an answer to two decimal places.) 2) What is the probability that John satisfies after eating the dish?
What is the relationship between two events if the conditional probability is equal to the "unconditional" probability? That is: if P(A|B) = P(A)?
A cell phone company collects the following data for a month on their customers:The company plans to build a cell phone tower at any one of the areas. It is based on the probability of a customer available in a particular area in the month.Which area will they choose to build the tower?

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