Saturday

April 18, 2015

April 18, 2015

Posted by **Susan** on Saturday, December 5, 2009 at 6:35am.

(A) 20 units.

(B) 50 units.

(C) 49 units.

(D) 34 units.

(E) None.

(Solution is A, 20 units)

- Economics -
**economyst**, Saturday, December 5, 2009 at 3:48pmIf she makes 20, she sells all 20 and makes 20 profit.

If she makes 50 there is a .5 chance she sells all 50 and makes a 50 profit, and a .5 chance she sells 20, throws 30 in the trash and makes a 10 loss. Her expected profit is .5*50 + .5*(-10) = 20.

Since the sure-thing of option A makes 20 and the risky option makes of option B makes 20 and since she is a bit risk averse, option A is better than option B.

Just to be sure, repeat for options C and D.

**Answer this Question**

**Related Questions**

advanced math - The marginal cost of a product can be thought of as the cost of ...

Algebra - 83. Minimizing Marginal Cost The marginal cost of a product can be ...

economics - Suppose a monopolist faces an inverse demand function P=100-1/2Q, ...

Economics - Consider the problem of a firm that needs to decide how much output...

Managerial Economics - You own and operate PC’s R Us, a firm that manufactures ...

Economics - Cournot Model - There is one firm with a marginal cost of 0. It's ...

econ 460 - 1. The demand for a new drug is given by P = 4 – 0.5Q. The marginal ...

math - The daily cost C, in RM, of producing a product is C(x)=1000+72x-0.06x^2...

economics - A monopolist faces an upward-sloping marginal cost curve. Its ...

economic math - Imagine that you own a small business and that you have to ...