You are interested in buying a refrigerator. You estimate that the lifetime of a refrigerator is an exponential random variable with parameter = 1/5 . You can buy a new refrigerator for $800 or a used one of the same model for $250. The used one has been in use for 3.5 years. You decide that you think a refrigerator's worth is proportional to the expected amount of time you'll be able to use it. With this in mind, which refrigerator are you better off buying? What's the maximum you would be willing to pay for the 3.5-year-old refrigerator, knowing you can get a new one for $800? What if a refrigerator's lifetime is distributed as a gamma random variable with parameters r = 2 and = 1/5 ?