TABLE 5-8 Two Different Designs on a New Line of Winter Jackets

question 88

Short Answer

TABLE 5-8
Two different designs on a new line of winter jackets for the coming winter are available for your manufacturing plants. Your profit (in thousands of dollars) will depend on the taste of the consumers when winter arrives. The probability of the three possible different tastes of the consumers and the corresponding profits are presented in the following table.

-Referring to Table 5-8, what is the variance of your profit when Design B is chosen?

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Definitions:

MC < ATC

A condition where the marginal cost of producing an additional unit is less than the average total cost, implying the company can lower its average total cost by increasing production.

Perfectly Competitive

A perfectly competitive market is characterized by many buyers and sellers, homogenous products, and free entry and exit, leading to price determination by market forces.

Marginal Cost Curve

A graphical representation that shows how the cost of producing one more unit of a good changes as the quantity produced increases.

Short-run Supply Curve

A graphical depiction that showcases how much of a product suppliers are willing and able to sell at different prices in the short run, with at least one input fixed.