The Basic Practice of Statistics 7th Edition

Published by W. H. Freeman
ISBN 10: 146414253X
ISBN 13: 978-1-46414-253-6

Chapter 15 - Sampling Distributions - Apply Your Knowledge - Page 350: 15.5

Answer

If company sells only 12 policies, then if any one loss occurs, the company will lose money. However, if the company sells thousands of policies, then according to the law of large numbers, average loss will be close to the mean (i.e, $125), and hence the company can make a profit.

Work Step by Step

If company sells only 12 policies, then if any one loss occurs, the company will lose money. However, if the company sells thousands of policies, then according to the law of large numbers, average loss will be close to the mean (i.e, $125), and hence the company can make a profit.
Update this answer!

You can help us out by revising, improving and updating this answer.

Update this answer

After you claim an answer you’ll have 24 hours to send in a draft. An editor will review the submission and either publish your submission or provide feedback.

GradeSaver will pay $15 for your literature essays
GradeSaver will pay $25 for your college application essays
GradeSaver will pay $50 for your graduate school essays – Law, Business, or Medical
GradeSaver will pay $10 for your Community Note contributions
GradeSaver will pay $500 for your Textbook Answer contributions