Question: The frequency of breakdown of a machine that issues lottery

The frequency of breakdown of a machine that issues lottery tickets is given in the following table. Repairs cost an average of $ 240. A service firm is willing to provide preventive maintenance under either of two options: # 1 is $ 500 and covers all necessary repairs, and # 2 is $ 350 and covers any repairs after the first one. Which option would have the lower expected cost: pay for all repairs, ser-vice option # 1, or service option #2?

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  • CreatedDecember 30, 2014
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