The lifetime of batteries is Exponential with mean 6. Batteries are sold for $100 each. If a battery lasts less than 2 years, the manufacturer will pay the purchaser the pro rata share of the purchase price. For example if the battery lasts only 1.5 years, the manufacturer will pay the purchaser (100)(2 - 1.5)/2 = 25. What is the expected amount paid by the manufacturer per battery sold?
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Step 1: Calculate the expected amount paid by the manufacturer per battery sold using the formula derived in the Explanation. Show more…
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