Scenario 5.1: Aline and Sarah Decide to Go into Business Together as Together

question 149

Multiple Choice

Scenario 5.1:
Aline and Sarah decide to go into business together as economic consultants. Aline believes they have a 50-50 chance of earning $200,000 a year, and that if they don't, they'll earn $0. Sarah believes they have a 75% chance of earning $100,000 and a 25% chance of earning $10,000.
-Refer to Scenario 5.1. The probabilities discussed in the information above are:

• A) objective because they are single numbers rather than ranges.
• B) objective because they have been explicitly articulated by the individuals involved.
• C) objective because the event hasn't happened yet.
• D) subjective because the event hasn't happened yet.
• E) subjective because they are estimates made by individuals based upon personal judgment or experience.

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Definitions:

Bidders

Individuals or entities that offer a price for goods, services, or assets in competitive situations such as auctions.

Common-value Auction

A type of auction wherein all bidders have the same valuation for the item for sale, but they have different information about the item’s actual value.

Exact Value

The precise numerical quantity or measurement without approximation.

Estimate

To make an approximate judgment or calculation of the value, number, quantity, or extent of something.