Tom is a college student at FSU. He has the option to buy a parking pass at the beginning of the year for $250. If Tom doesn't buy the pass, he has to park on the street or pay the valet parking service $5 per day. If Tom does not buy the parking pass, he expects to have to use the valet parking services 40 times. However, he may end up using the valet service up to 80 times. Tom decides that he would rather pay the $250 than risk not being able to find a spot on the street. Tom could be described as ...

Question

Kaelyn Pierce

Business

23 June, 16:31

Tom is a college student at FSU. He has the option to buy a parking pass at the beginning of the year for $250. If Tom doesn't buy the pass, he has to park on the street or pay the valet parking service $5 per day. If Tom does not buy the parking pass, he expects to have to use the valet parking services 40 times. However, he may end up using the valet service up to 80 times. Tom decides that he would rather pay the $250 than risk not being able to find a spot on the street. Tom could be described as ...

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Answers (1)

Know the Answer?

Johnny Wang · Answer 1

The correct answer is risk averse.

Explanation:

A risk-averse person is a person who tries to minimize risk. Such people, when faced by two alternative decisions, choose the one with less risk. Such people are said to be having a low-risk tolerance.

Here, Tom is facing two decisions. One involves spending $250 and other involves the risk of spending up to $400. Tom will choose the former or less risky option because he is risk-averse and prefers to reduce risk.