Sunday

March 1, 2015

March 1, 2015

Posted by **JO** on Sunday, April 18, 2010 at 3:01am.

Profit in 2008

No Tariff Tariff

Option A: Produce all output in Britain $1,200,000 $ 800,000

Option B: Produce 50% in the United States $ 875,000 1,000,000

Remox hires a consulting firm to assess the probability that a tariff on imported textiles will in fact pass a congressional vote and not be vetoed by the president. The consultants forecast the following probabilities:

Probability

Tariff will pass 30%

Tariff will fail 70

a. compute the expected profits for both options.

b. based on the expected profit only, which option should Remox choose?

c. Compute the probabilities that would make Remox indifferent between options A and B using that rule.

d. Compute the standard deviations for options A and B facing Remox Corporation.

e. What decision would Remox make using the mean-variance rule?

f. What decision would Remox make using the coefficient of variation rule?

- Managerial Economics -
**HECTOR**, Tuesday, March 25, 2014 at 12:46amA;SDKJ

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