Answer the following statements true (T) or false (F)

Question

1) Effective managers use marginal analysis to determine how much to spend on actions to lower the probability of bad outcomes.

2) The expected marginal benefit of reducing the probability of an accident is equal to the decrease in the expected cost of the accident.

3)



The above table shows the quantity of patents reviewed by a firm's attorney and the corresponding probability that the firm will infringe on another firm's patent. The cost of infringement is $50,000.



The expected marginal benefit of reviewing additional patents increases as the number of patents reviewed increases.



4) If actions to reduce the expected cost of an accident are equally effective, managers should authorize the most expensive actions first.

5) It is not optimal to drive the probability of a patent infringement to zero.

6) In some situations, managers cannot make incremental actions to prevent product failure and must either decide to take preventative action or not.

Answer 1

1) TRUE
2) TRUE
3) FALSE
4) FALSE
5) TRUE
6) TRUE