Suppose that you own a store that sells a particular brand of stove for $1000. you purchase the stoves from a distributor for $800 each. you believe that each stove has a lifetime that is an exponential random variable with rate parameter λ = 1 10 , where the unit of time is in years. you would like to offer the following extended warranty on this stove: if the stove breaks within r years, you will replace the stove completely (at a cost of $800 to you). if the stove lasts longer than r years, the extended warranty is void. let c be the cost you charge a customer for this extended warranty. given r, what value of c will you break even, that is, you will make zero profit from the warranty itself? what do you think is a reasonable choice of r

1. all other things equal, according to the law of demand, when the price of a good falls, the demand for the good falls the demand for the good rises the quantity demanded of the good falls the quantity demanded of the good rises 2. when a market is in equilibrium, the quantity of the good that buyers are willing and able to buy exactly equals the quantity that sellers are willing and able to sell cannot be determined is less than the quantity that sellers are willing and able to sell is greater than the quantity that sellers are willing and able to sell 3. which of the following factors does not influence the demand for a good or service? consumer (buyer) income the price of related goods the number of sellers buyer expectations 4. when the number of sellers in a market increases, demand rises supply rises the price rises, all else equal the number of buyers falls

Cynthia is a hospitality worker in the lodging industry who prefers to cater to small groups of people. she might want to open a

If the family’s net monthly income is 7,800 what percent of the income is spent on food clothing and housing?