Refer to the Following Situation:
a Firm Is Making Production

question 5

Multiple Choice

Refer to the following situation:
A firm is making production plans for next quarter, but the manager does not know what the price of the product will be next month. She believes there is a 30 percent chance price will be $500 and a 70 percent chance price will be $750. The four possible profit outcomes are:
$$\begin{array} { l c c } & \text { Prod (toss) when pice is: } \\\hline & \$ 500 & \$ 750 \\\hline\text { Option } A \text { produce } 1,000 \text { unids } & - \$ 12,000 & \$ 80,000 \\\text { Oplion } B \text { produce } 2,000 \text { unids } & \$ 20,000 & \$ 150,000\end{array}$$
-Which option has the highest (absolute) risk?

• A) Option A is riskier than Option B.
• B) Option B is riskier than Option A.
• C) Both options have the level of risk if the manager is risk averse.
• D) cannot calculate risk with the given information

---

Definitions:

Manufacturing Consent

Manufacturing Consent is a concept and title of a book by Edward S. Herman and Noam Chomsky that describes how media and propaganda are used to create and manipulate public opinion to serve elite interests.

Dominant Classes

Social groups that possess a disproportionate share of wealth, power, and privilege in a society, often shaping policies and norms to their advantage.

Chomsky And Herman

refers to Noam Chomsky and Edward S. Herman, who co-authored the propaganda model of communication, examining the biases of mass media.

Functionalists

Sociologists who focus on how society's components fit together to make it function cohesively, emphasizing the role of social institutions and norms.