Answer:

What is the Fraction of Defective New Cars?

The fraction of new cars that are defective, d, is estimated to be 20%. This is based on the expected value of a non-defective car, which is €6,000, and the expected value of a new car, which is €4,000. Since new cars are expected to sell for €4,000 and used ones for €1,000, the fraction of defective new cars can be calculated by subtracting €4,000 from €6,000 and then dividing by €2,000. This gives a fraction of d=20%.

How is the Fraction of Defective New Cars Calculated?

The fraction of defective new cars, d, is calculated by subtracting the expected value of a new car from the expected value of a non-defective car, and then dividing by the expected value of a used car. This gives the fraction d=20%.

What is the Value of Non-Defective Cars?

The expected value of a non-defective car is €6,000. This is based on the fact that new cars are expected to sell for €4,000 and used cars for €1,000.

What is the Value of New Cars?

The expected value of a new car is €4,000. This is based on the fact that used cars are expected to sell for €1,000.

Related Questions

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