Firm X is currently selling a consumer good at a standard price,but is also considering cutting its price.The main risk facing the firm concerns the course of the economy in the near-term: whether the economy will grow at a steady pace (G)or whether it will experience a recession (R).The table below shows the firm's possible profit results (in $ millions).Finally,the firm judges that there is a 70% chance of growth and a 30% chance of a recession.
(a)Firm X must make its decision now (before knowing the future course of the economy).Which pricing policy maximizes its expected profit?
Definitions:
Frequency Distribution
A Frequency Distribution is a statistical representation showing the number of observations within specified intervals or categories.
Scatter Plot
A graphical representation of data points on a two-dimensional plane, where each axis represents a different variable, used to observe relationships between variables.
Box-and-Whisker Plot
A graphical representation used in statistics to display the distribution of a dataset that shows the median, quartiles, and outliers.
STDEV.S(data range)
A statistical function that calculates the standard deviation for a sample set of data, measuring how much data points deviate from the mean.
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