2. Suppose one in every four new personal computers is defective. The defective ones, however, cannot...

2. Suppose one in every four new personal computers is defective. The defective ones, however, cannot be identified except by those who own them. Consumers are risk neutral and value nondefective at $2000 each. Computers do not depreciated physically with use. If used computers sell for $600, how much do new ones sell for?

Expert Solution

It has been provided that one in every four new personal computers is defective.

This means probability of defective new personal computer is (1/4) 0.25 and the probability of non-defective new personal computer is (3/4) 0.75.

The lemon principle applicable to the trade of used goods indicate that all the computers sold in the second hand market would have some defect.

So, the price of used computer reflects the price of defective new personal computer.

The price of used computer is $600.

So,

The price of defective new personal computer is also $600.

The price of non-defective new personal computer is $2,000.

Calculate the price of new computer -

Price of new computer = [Price of defective new personal computer * probability of defective new personal computer] + [Price of non-defective new personal computer * probability of non-defective new personal computer]

Price of new computer = [$600 * 0.25] + [$2,000 * 0.75] = $150 + $1,500 = $1,650

The Price of new computer is $1,650.

Rahul Sunny answered 1 year ago

Suppose one in every ten new laptops is defective. The defective ones, however, cannot be identified...

Suppose one in every ten new laptops is defective. The defective ones, however, cannot be identified except by those who own them. Consumers are risk neutral and value non-defective laptops at $500 each. If used laptops sell for $100, how much do new ones sell for? Show your work. (Hint: Use the lemons principle.)

In a gross (144) of transistors, there are 2 defective ones. Three (3) transistors are selected...

In a gross (144) of transistors, there are 2 defective ones. Three (3) transistors are selected randomly. a. what is the number of ways one can select exactly one defective transistor among the three? b. what is the probability of selecting exactly one defective transistor among the three?

A bag contains two red marbles, four green ones, one transparent one, two yellow ones, and...

A bag contains two red marbles, four green ones, one transparent one, two yellow ones, and three orange ones. You select three at random. Compute the probability of the given event. (Enter your probability as a fraction.) At least one is not red.

Personal computers and other electronics have become integral to our lives. These machines, however, are made...

Personal computers and other electronics have become integral to our lives. These machines, however, are made with many products that during production and on disposal have an impact on the environment. Since the disposal of computers can be hazardous to our environment, some have suggested that when buying a computer system to buy one that will last as long as possible. You will have one attempt to complete the assignment. 1. Find an article on the Internet related to the...

Axline Computers manufactures personal computers at two plants, one in Texas and the other in Hawaii....

Axline Computers manufactures personal computers at two plants, one in Texas and the other in Hawaii. The Texas plant has 35 employees; the Hawaii plant has 25. A random sample of 10 employees is to be asked to fill out a benefits questionnaire. (Round your answers to four decimal places.) (a) What is the probability that none of the employees in the sample work at the plant in Hawaii? (b) What is the probability that 1 of the employees in...

Suppose that in a production run of 40 units, 6 are defective. A sample of four...

Suppose that in a production run of 40 units, 6 are defective. A sample of four units is to be randomly drawn from the forty. What is the probability that 2 or more are defective if the samples are drawn: a) With replacement? b) Without replacement? For part b, just show how you would set up the problem – there is no need to perform the actual calculations. Please show steps and explain.

A bag contains 4 red marbles, 2 green ones, 2 white ones, and 1 purple one....

A bag contains 4 red marbles, 2 green ones, 2 white ones, and 1 purple one. Michelle reaches into the bag and grabs 5 of the marbles. 1) Find the probability that she has 2 red ones and 1 of each of the other colors. 2) Find the probability that she has at least 1 green marble. Express your answers as simplified fractions using the forward slash. Ex: 1/2

Suppose that a bag contains 16 items of which 8 are defective. Four items are selected...

Suppose that a bag contains 16 items of which 8 are defective. Four items are selected at random without replacement. Find the probabilities that: Provide your answers in 2 d.p (decimal point) without space in between the values only one item is defective all selected items are non-defective all selected items are defective at least one of the selected items is defective

Applying the Central Limit Theorem, suppose that personal computers (PC) have a mean of weight of...

Applying the Central Limit Theorem, suppose that personal computers (PC) have a mean of weight of 7.5 pounds with a standard deviation of 1.1 pounds. If you take a sample of the weight of 50 different brands of PC, the sample standard deviation is: Select one: a. 7.5 1.1 7.51.1 b. 1.1 50 √ 1.150 c. 7.5+1.1 7.5+1.1

every quadrilateral tessellates the plane. However, can an arbitrary quadrilateral such as the one shown below...

every quadrilateral tessellates the plane. However, can an arbitrary quadrilateral such as the one shown below have all its sides altered and still tessellate the plane? Decide which methods described in this activity set you can use to alter the sides of this quadrilateral and tessellate the plane. In the pictured quadrilateral, no sides are of equal length and no sides are parallel. For each method you use, make a template for your figure, and determine whether or not it...

Question