A CEO Is Looking to Determine How Much Profit the Company

question 103

Multiple Choice

A CEO is looking to determine how much profit the company can make if they purchase one of their competitors.Key to the decision is how much profit each competitor is likely to make given different levels of future demand in their market.Estimates of the profits for each competitor that could be purchased are estimated in the table below based on demand.If the CEO knows that demand will significantly decrease, which competitor should the company purchase? $$\begin{array} { | l | c | c | c | c | } \hline \text { PAYOFFS (\$mil) } & \text { Biprificarit decrease } & \text { Small decrease } & \text { Bmall increase } & \text { Siprificarit increase } \\\hline \text { Competitor A } & \$ 50 & \$ 100 & \$ 270 & \$ 1,450 \\\hline \text { Competitor B } & \$ 25 & \$ 75 & \$ 350 & \$ 1,330 \\\hline \text { Competitor C } & \$ 15 & \$ 80 & \$ 300 & \$ 1,700 \\\hline \text { Competitor D } & \$ 55 & \$ 90 & \$ 33 & \$ 1,500 \\\hline\end{array}$$

• A)Competitor A
• B)Competitor B
• C)Cannot determine due to uncertainty
• D)Competitor C
• E)Competitor D

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Definitions:

Autokinetic Illusion

A visual illusion in which a stationary point of light appears to move in the dark.

Hue

A color or shade in the spectrum, defined by its wavelength of light.

Saturation

In a chemical context, the point at which a solution can no longer dissolve more of a solute; in color theory, the intensity of a color.

Subtractive Color

A color model in which colors are created by subtracting light from a white background using color filters, typical in printing.