#1) An investment firm is considering two alternative investments, Aug and Breakfast, under two possible future sets of economic conditions, good and poor. There is a .60(60%) probability of good economic conditions occurring and a .40 (40%) probability of poor economic conditions occurring. The expected gains and losses under each economic type of conditions are shown in the following table: Economic Conditions Investment Good Poor A 900,000 - 800,000 120,000 70,000 Using the expected value of each investment alternative, determine which should be selected.

#1) An investment firm is considering two alternative investments, Aug and Breakfast, under two possible future sets of economic conditions, good and poor. There is a .60(60%) probability of good economic conditions occurring and a .40 (40%) probability of poor economic conditions occurring. The expected gains and losses under each economic type of conditions are shown in the following table: Economic Conditions Investment Good Poor A 900,000 - 800,000 120,000 70,000 Using the expected value of each investment alternative, determine which should be selected.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Subject: Management Science

#1) An investment firm is considering two alternative investments, Aug and Breakfast,
under two possible future sets of economic conditions, good and poor. There is a
.60(60%) probability of good economic conditions occurring and a .40 (40%) probability
of poor economic conditions occurring. The expected gains and losses under each
economic type of conditions are shown in the following table:
Economic Conditions
Investment
Good
Рoor
A
900,000
- 800,000
B
120,000
70,000
Using the expected value of each investment alternative, determine which should be
selected.

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PRINT YOUR NAME (LAST) (FIRST) Aggregate Cost Data Unit Cost Data Average Average Average I Fixed Variable Total Cost TC Marginal Quantity Fixed Variable Total Change in I Cost of Output (FC) (VC) Cost ATC Cost Cost Total Cost (TC) (ATC) Plot MC at Output Cost Cost IFC VC $600 $ 0 $ 600 I XX XX XX XX $3.00 $300 50 100 600 300 900 I $6.00 $3.00 $9.00 100 1.00 150 200 600 400 | 3.00 2.00 5.00 50 .50 - 250 300 1050 I 2.00 1.50 1.00 350 400 1150 I 1.50 1.38 2.88 200 2.00 - 450 500 600 750 1350 I 1.20 1.50 550 600 600 1200 1800 3.00 10.00 - 650 700 2200 2800 I.85 3.15 PLOT THE APPROPRIATE DATA FROM THE PRECEDING TABLE ON THE GRAPHS ON P. 134 AND 135 BEFORE ANSWERING THE EIGHT QUESTIONS BELOW. QUESTIONS 5-8 ARE ON PAGE 136. 1. How is marginal cost (ATC/AQ) represented in your graph on page 134? 2. On your graph on page 135 Variable Cost per unit (VC/Q or average variable cost) is at a minimum at an output level of, units. 3. On your graph on page 135 Total Cost per unit (TC/Q or average…