The Manager's Utility Function for Profit Is U $\pi$ )= 10 Ln

question 10

Multiple Choice

The manager's utility function for profit is U( $\pi$ ) = 10 ln( $\pi$ ) ,where $\pi$ is the dollar amount of profit.The manager is considering a risky decision with the four possible profit outcomes shown below.The manager makes the following subjective assessments about the probability of each profit outcome: $$\begin{array} { c c } \text { Probability } & \text { Profit outcome (\$) } \\\hline 0.05 & \$ 5,000 \\0.10 & \$ 10,000 \\0.35 & \$ 15,000 \\0.50 & \$ 20,000\end{array}$$ What is the expected utility of profit?

• A)97
• B)245
• C)462
• D)974
• E)1,033

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Definitions:

SWOT Analysis

A strategic planning tool used to identify and analyze the Strengths, Weaknesses, Opportunities, and Threats involved in a project or in a business venture.

Strength

The quality or attribute of being physically strong, or the capacity to sustain the application of force without breaking or yielding.

Unionized Firms

Companies where the workforce is represented by one or more unions, which negotiate wages, working conditions, and other labor terms.

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The termination of employment of a workforce either temporarily or permanently, often due to economic downturns or company restructuring.