Olivia decides to choose a data package that minimizes her total cost. She is not sure...
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Olivia decides to choose a data package that minimizes her total cost. She is not sure how much data she will use over the month, but she believes that it is reasonable to assume that she will use 4 GB or 6 GB. (b) Identify the recommended data package using the conservative approach. (i) (10 marks) Assume that the probability of Olivia using 4 GB and 6 GB of data per month is 0.4 and 0.6, respectively. Using the expected value approach, which data package should Olivia choose? (4 marks) Discuss how changes in the probabilities in (i) affect the decision. (11 marks) Question 3 Olivia will receive a one-month training abroad. In order to facilitate contact, she plans to purchase a data package. She found three monthly data package options. The price of each package is divided into two parts: a fixed fee and a variable fee. Regardless of the data usage, a fixed fee will be incurred. If the data usage exceeds a set limit, the amount exceeding the limit will incur variable fees. The fixed fees, set limits, and variable fees are shown in Table 1. Table 1: Data package price Package Fixed fee ($) 1 2 3 12 15 20 Set limit (GB) 4 5 6 Variable fee ($) per additional 0.001 GB 0.006 0.010 0.008 Olivia decides to choose a data package that minimizes her total cost. She is not sure how much data she will use over the month, but she believes that it is reasonable to assume that she will use 4 GB or 6 GB. (b) Identify the recommended data package using the conservative approach. (i) (10 marks) Assume that the probability of Olivia using 4 GB and 6 GB of data per month is 0.4 and 0.6, respectively. Using the expected value approach, which data package should Olivia choose? (4 marks) Discuss how changes in the probabilities in (i) affect the decision. (11 marks) Question 3 Olivia will receive a one-month training abroad. In order to facilitate contact, she plans to purchase a data package. She found three monthly data package options. The price of each package is divided into two parts: a fixed fee and a variable fee. Regardless of the data usage, a fixed fee will be incurred. If the data usage exceeds a set limit, the amount exceeding the limit will incur variable fees. The fixed fees, set limits, and variable fees are shown in Table 1. Table 1: Data package price Package Fixed fee ($) 1 2 3 12 15 20 Set limit (GB) 4 5 6 Variable fee ($) per additional 0.001 GB 0.006 0.010 0.008
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a To identify the recommended data package using the conservative approach we need to compare the total cost for both options of using 4 GB and 6 GB o... View the full answer
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