You are a hotel manager considering four projects that yield different payoffs, depending upon whether there is an economic boom or a recession. The potential payoffs and corresponding payoffs are summarized in the following table. ProjectBoom (50%)Recession (50%)A$40-$20B-$10$30C$50-$50D$60$60The expected value of project A is:
A. $20.
B. $10.
C. $5.
D. None of the answers are correct.
Answer: B
You might also like to view...
Explain why expansionary monetary policy would not result in reduced unemployment rates if workers and firms have rational expectations
What will be an ideal response?
A perfectly competitive firm produces 50 units of output, at equilibrium, in the short run. The total cost borne by the firm is $300 and the average revenue is $2 . Therefore, the firm:
a. is just breaking even. b. is earning positive profits. c. is facing a positively sloped demand curve. d. is suffering losses. e. is experiencing diseconomies of scale.
Even-handed enforcement of contracts fuels economic prosperity because it
A) increases market uncertainty and the probability of contract violations. B) promotes gains from trade by keeping transaction costs low. C) increases transaction costs. D) permits individuals to invade or infringe on the property rights of others.
Who is most likely to be earning economic rent?
A. A landlord B. A postal employee C. Someone who lives in a rental apartment D. A major league baseball player