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true or false If profit (∏=TR−TC∏=TR−TC) is equal to zero, the entrepreneur has earned nothing for his talent and risk taking.
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- A distillery makes whisky, where its profits from production per bottle are given by T = p – y? where p is the price it charges per bottle and y is the number of years the bottle is aged. There are two types of whisky drinkers, connoisseurs (H type) and casuals (L type). H-type have utility UH (y, p) = 8y – p, while L-type have utility uz (y, p) = 2y – p. There are 10 consumers of each type, and each will buy at most one bottle. Each consumer's utility if she does not buy is 0. If a consumer is indifferent between buying two bottles, assume she will buy the more aged one (the one with higher y). If a consumer is indifferent between buying a bottle and not buying, assume she will buy. Bottles are characterised by (y, p), years of age and price. For each menu of offerings below, calculate the distillery's profit. (1, 9) and (4, 24) (1, 2) and (4, 24) (1, 2) and (2, 24) Calculate the firm's profits when it chooses the optimal menu.The president of a small business is provided with the following options to improve his company by a consulting. Based on the data provided, which option should he choose? Cost (thousands of dollars) Benefit(thousands of dollars) Option A 10 50 Option B 50 100 Option C 120 150 Option D 5 15 Option E 125 200 a) option A b) option B c) option C d) option D e) option EIn the table below x denotes the X-Tract Company’s projected annual profit (in $1,000). The table also shows the probability of earning that profit. The negative value indicates a loss. x f(x) x = profit -100 0.01 f(x) = probability -200 0.04 0 100 0.26 200 0.54 300 0.05 400 0.02 8 What is the expected value of profit? a $136 b $142 c $148 d $154
- Risky Prospect Y is defined as: Y = ($7,0.25; $12,0.50; $25 , 0.25) What is the expected value of prospect Y? (Do not include a dollar sign in your answer)You are the CEO of a company. You have an opportunity to undertake the following project: pay $1,000 today and receive $1,300 a year from now. If the interest rate is 30%, the net gain of the project (cost minus benefit) is: A) $440. B) $200. C) $166. D) $0.M2
- Julia and Julia is a small, owner-operated bakery. The owner of Julia & Julia is considering two alternative investments, X and Y. There are four possible outcomes for each (1,2,3 and 4 for Investment X and A, B, C, D for Investment Y). Investment X Investment Y Outcome Payoff Payoff Probability 0.2 Outcome Probability 1 A 0.1 2 2 0.2 B 30 0.2 12 0.4 1 0.5 4 14 0.2 14 0.2 (a) To one decimal place (e.g. 3.5), what are the expected values of Investment X and of Investment Y? The expected value of X is The expected value of Y is Say the owner's utility function is given by U (Z) = VZ where U is the utility and Z is X or Y. (b) Is the owner risk averse? O Yes O No (c)Which investment will the owner choose? OInvestment X Investment YIn the Hawaiian Beach Boy surf board vendor scenario, what if the fine was increased to $190 but the probability of a fine decreased to one in 20 days, 5%? What would be the expected value – Exp(RS) -- of continuing to rent surfboards? Assume the other numbers stay the same. He makes $300/day and to rent boards from friends costs him $100 a day. So, he makes $200 a day. Write out the expected value formula, plug in the numbers, and show the math. Hint: the Exp(RS) should be higher than the previously calculated $160.____ emphasizes economies of scale and decreases risk.
- arrow_forward Question Asked Jun 23, 2020 1 views Management of Ben Services identified two groups of individuals that would be interested in the vacation package consisting of room and board and/or entertainment. The maximum amount that group 1 is willing to pay for room and board is GHC 2500 and for entertainment is GHC 500. For group 2, the maximumamount they are willing to pay for room and board is GHC 1800 and forentertainment is GHC 750. Although Ben is not able to identify members of either group, it does know that each group values the components of the package differently. Assuming there are an equal number of members in each group and that the total membership in each group is a single individual. If the marginal cost of providing the service (room and board and/or entertainment) to each group is GHC 1000. i. If AG Travel and Tour wants to charge a package price, what is the highest price it can charge? ii. What profit will AG Travel and Tour make if it…B) A firm has the option to decide between two new technologies T1 and T2. The monetary payoffs and probabilities for each technology is given below X2 Probability under state X; Income ($) with TI under state X Income (S) with T2 under state Xi 0.3 0.4 0.3 8 18 6 16 The utility function for the firm is given by u = E(T) – 0 Var(1), where E(x) represents average income, Var(n) represents the variance of income, and 020 1) Show that the firms risk preferences exhibit constant absolute risk aversion (CARA) 2) When 0- 0.1 how does the firms risk premium change under the two technologies TI and T2?Philippines You're the manager of global opportunities for a U.S. manufacturer that is considering expanding sales into Asia. Your market research has identified the market potential in Malaysia, the Philippines, and Singapore as described in the following table: Malaysia Probability Units Philippines Probability Units Singapore Probability Units Big Success Level 0.3 1,100,000 0.3 1,300,000 Mediocre Failure 0.2 352,000 0.3 650,000 0.1 0.7 600,000 360,000 0.5 0 0.4 0 0.2 0 The product sells for $20, and each unit has a constant marginal cost of $16. Assume that the (fixed) cost of entering the market (regardless of which market you select) is $500,000.
