Step-by-step solution file
I need help with my homework. Multiple choice questions and two
I need help with my homework. Multiple choice questions and two problem set.
Book : Managerial Economic: A Problem-Solving Approach (3rd Edition) Chapter 17
Class: Economic and decision making
Book Managerial Economic: A Problem-Solving Approach (3rd Edition)n
Multiple choice questions
1. You are taking a multiple-choice test that awards you one point for a correct answer and
penalizes you 0.25 points for an incorrect answer. If you have to make a random guess and there
are five possible answers, what is the expected value of guessing?
a. 0.5 points
b. 0.25 points
c. ?0.25 points
d. 0 points
2. Your firm is considering a potential investment project, and your finance group has prepared
the following estimates: an NPV of $10 million if the economy is strong (30% probability), an
NPV of $4 million if the economy is normal (50% probability), and an NPV of ?$2 million if the
economy is poor (20% probability). What is the expected value of NPV (to the nearest dollar) for
the following situation?
a. $3.4 million
b. $4.0 million
c. $4.6 million
d. $5.2 million
3. You?ve just decided to add a new line to your manufacturing plant. Compute the expected
loss/profit from the line addition if you estimate the following:
? There?s a 70% chance that profit will increase by $100,000.
? There?s a 20% chance that profit will remain the same.
? There?s a 10% chance that profit will decrease by $15,000.
a. Gain of $100,000
b. Gain of $71,500
c. Loss of $15,000
d. Gain of $68,500
4. Your software development company is considering investing in a new product. If it is very
well received by users (30% probability), you expect an NPV of $500,000; if users are mildly
happy with the product (50%
probability), you expect an NPV of $400,000; and if users are not that excited by the product
(20% probability), you expect an NPV of $300,000. What is the expected NPV of the product?
d. None of the above 5. Suppose an investment project has an NPV of $150 million if it becomes successful and an
NPV of ?$50 million if it is a failure. What is the minimum probability of success above which
you should make the investment?
d. 0.1 6. You want to price posters at the Poster Showcase profitably and run an experiment to estimate
the demand elasticity. You raise the price of kitten posters by 10% but keep your dog poster
prices unchanged. After a month, kitten poster unit sales fall by 12% but dog posters rise by 8%.
What is the difference-in-difference estimate of the demand elasticity?
7. Your company has a customer list that includes 200 people. Of those 200, your market
research indicates that 140 of them hate receiving coupon offers whereas the remainder really
likes them. If you send a coupon mailer to one
customer at random, what?s the probability that he or she will value receiving the coupon?
8. Your production line has recently been producing a serious defect. One of two possible
processes, A and B, could be the culprit. From past experience you know that the probability that
A is causing the problem is 0.8 but investigating A costs $100,000 while investigating B costs
only $20,000. What are the expected error costs of shutting down process B first?
9. You have two types of buyers for your product. The first type values your product at $10; the
second values it at $6. Forty percent of buyers are of the first type ($10 value); 60% are of the
second type ($6 value). What price maximizes your expected profit?
d. $8 10. You are considering entry into a market in which there is currently only one producer
(incumbent). If you enter, the incumbent can take one of two strategies, price low or price high.
If they price high, then you expect a $60k profit per year. If they price low, then you expect a
$20k loss per year. You should enter if:
a. You believe demand is inelastic.
b. You believe the probability that the incumbent will price low is greater than 0.75.
c. You believe the probability that the incumbent will price low is less than 0.75.
d. You believe the market-size is growing.
17-2 Game Show Uncertainty
In the final round of a TV game show, contestants have a chance to increase their current
winnings of 1 million dollars to 10 million dollars. If they are wrong, their prize is decreased to
$100,000. To win, they have to guess the exact percentage that answered a question a certain
way, and the range has already been narrowed to an 11-point range. So, for example, the
contestant knows that the correct answer is between 20% and 30% and he or she must guess the
correct percentage in that range. So, let?s say you have no idea what the right answer is and have
to make a random guess. Should you play?
The HR department is trying to fill a vacant position for a job with a small talent pool. Valid
applications arrive every week or so, and the applicants all seem to bring different levels of
expertise. For each applicant, the HR manager gathers information by trying to verify various
claims on resumes, but some doubt about fit always lingers when a decision to hire or not is to be
made. What are the type I and II decision error costs? Which decision error is more likely to be
discovered by the CEO? How does this affect the HR manager?s hiring decisions?
This question was answered on: Feb 21, 2020
This attachment is locked
We have a ready expert answer for this paper which you can use for in-depth understanding, research editing or paraphrasing. You can buy it or order for a fresh, original and plagiarism-free copy (Deadline assured. Flexible pricing. TurnItIn Report provided)
Need a similar solution fast, written anew from scratch? Place your own custom order
We have top-notch tutors who can help you with your essay at a reasonable cost and then you can simply use that essay as a template to build your own arguments. This we believe is a better way of understanding a problem and makes use of the efficiency of time of the student. New solution orders are original solutions and precise to your writing instruction requirements. Place a New Order using the button below.