Scenario 17.5 Consider the Following Information

question 111

Multiple Choice

Scenario 17.5
Consider the following information:
Income to the firm from workers who sell door-to-door
Bad Luck Good Luck
Low Effort (e = 0) $5,000 $7,000
High Effort (e = 1) $7,000 $13,000
Cost of effort: c = $2500e
Probabilities: Bad luck = .75; Good luck = .25
-Refer to Scenario 17.5. If low effort is exerted, expected income is:

• A) $5000.
• B) $5500.
• C) $6000.
• D) $6500.
• E) $7000.