Mark MUpp Has Just Been Fired as the University Bookstore Manager

question 6

Essay

Mark M.Upp has just been fired as the university bookstore manager for setting prices too low (only 20 percent above suggested retail).He is considering opening a competing bookstore near the campus, and he has begun an analysis of the situation.There are two possible sites under consideration.One is relatively small, while the other is large.If he opens at Site 1 and demand is good, he will generate a profit of $50,000.If demand is low, he will lose $10,000.If he opens at Site 2 and demand is high, he will generate a profit of $80,000, but he will lose $30,000 if demand is low.He also has the option of not opening at either site.He believes that there is a 50 percent chance that demand will be high.A market research study will cost $5,000.The probability of a good demand given a favorable study is 0.8.The probability of a good demand given an unfavorable study is 0.1.There is a 60 percent chance that the study will be favorable.
(a)Should Mark use the study? Why?
(b)If the study is done and the results are favorable, what would Mark's expected profit be?

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Definitions:

Combining Forms

Structural components in medical terminology that are used in conjunction with other words or word parts to build medical terms with specific meanings.

Heart

A muscular organ in most animals, which pumps blood through the blood vessels of the circulatory system, supplying oxygen and nutrients to the body.

Radiography

The medical imaging technique using X-rays, gamma rays, or similar ionizing radiation and non-ionizing radiation to view the internal form of an object.

X-ray Record

An image or record produced by radiography, showcasing the structure within the body for medical examination or diagnosis.