Assume that odds of a new computer requiring any type of service in the first two years are less than 1 in 10.000,and the average cost of any computer service call is only $50.However,Karen pays $200 for a two-year service contract on her new computer.She explains that her peace of mind is well worth the cost of the contract.What is Karen using to make her decision to purchase the service agreement in this case

Question

Quizplus · Accepted Answer

Karen is using subjective utility to make her decision, as she values the peace of mind the service contract provides more than the monetary cost of the contract itself. This decision is based on personal preference rather than objective cost-benefit analysis.

Assume That Odds of a New Computer Requiring Any Type