(Lesson 3.06)
When is an extended warranty on an electronic device a good idea?

Question

BlackTom AI · Accepted Answer

Here is what the prompt presents:
- Question: '(Lesson 3.06) When is an extended warranty on an electronic device a good idea?'
- Answer field: 'When the product is new and unreliable'
- Answer options: (not provided in the data)

First, note that the list of answer choices is missing. In a typical multiple-choice item, we would evaluate each option against common principles about extended warranties. Since the option list is absent, we cannot compare multiple scenarios or rule out distractors in the usual way. Instead, we will focus on the provided answer statement and the general logic behind extended warranties in this context.

Analyzing the idea behind 'When the product is new and unreliable':
- The rationale is that a brand-new device may have a higher incidence of early defects due to manufacturing variability. If a device is prone to early failures, an extended warranty can offer financial protection against potentially costly repairs soon after purchase. This aligns with the idea of a 'new but risky' period where reliability has not yet been established.
- Considerations include the cost of the warranty relative to the potential repair costs, the likelihood of defect during the warranty window, and the terms of the warranty (what is covered, what is excluded, process for claims). If the device is new and among models with known early failure rates, the extended warranty could be more appealing.

Now, what would likely be considered less favorable justifications for an extended warranty in other typical options (had they been present):
- If the device is old or near end-of-life, the anticipated benefit of an extended warranty may be smaller because the probability of failure is already high but the remaining useful life is short, potentially making the warranty less cost-effective.
- If the device is highly reliable and has a strong track record, the expected need for warranty service is low, reducing the value proposition of purchasing extra coverage.
- If the warranty terms are narrow, expensive, or require inconvenient claim processes, the perceived value diminishes even for a new device with some risk of defect.

Because no alternative options are shown to compare, the reasoning focuses on the general principle: extended warranties tend to be more valuable when there is meaningful uncertainty about early reliability and repair costs, which is often cited for new devices with known or suspected higher defect rates.

In summary, the stated rationale—buying an extended warranty for a new but potentially unreliable product—captures a common cost-risk trade-off: you pay a premium up front to avoid potentially higher, unpredictable repair costs during the early period of use. If the test item were to present alternative scenarios, we would weigh each against these factors to determine relative value.

SOC-ECONB Semester Exam

(Lesson 3.06) When is an extended warranty on an electronic device a good idea?

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