Students who take drivers education have a 2% probability of having an accident in their first year of driving,while students who do not take drivers education have a 10% probability.Statistics show that the average cost of an accident is $8500.Statistics also show that 70% of new drivers have taken drivers education.What is the expected cost of an accident per driver in their first year of driving?
A)$119
B)$374
C)$646
D)$1020

Question

Quizplus · Accepted Answer

The expected cost of an accident per driver can be calculated by considering the probability of having an accident and the average cost of an accident for both groups (those who took drivers education and those who did not), and then taking a weighted average based on the proportion of new drivers in each group. For drivers who took education: 0.02 * $8500 = $170. For drivers who did not take education: 0.10 * $8500 = $850. Since 70% took drivers education and 30% did not, the expected cost per driver is: (0.70 * $170) + (0.30 * $850) = $119 + $255 = $374.

Students Who Take Drivers Education Have a 2% Probability of Having