John Is Trying to Decide Whether to Expand His Business

question 21

Multiple Choice

John is trying to decide whether to expand his business or not. If he continues his business as it is, with no expansion, there is a 50 percent chance his revenue will be $100,000 and a 50 percent chance his revenue will be $300,000. If he does expand, it will cost him $150,000, and there is a 30 percent chance his revenue will be $100,000; a 30 percent chance his revenue will be $300,000; and a 40 percent chance his revenue will be $500,000.John should expect that the value of his revenue will be ________ if he expands and ________ if he does not expand.

• A)$320,000; $200,000
• B)$170,000; $50,000
• C)$120,000; $200,000
• D)−$30,000; $200,000

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Definitions:

Partisanship

Devotion or allegiance to a particular political party or cause, sometimes resulting in a polarized political environment.

Civil Service Commission

A government body charged with overseeing the hiring and management of federal government employees to ensure a merit-based, non-partisan civil service.

Pendleton Act

Legislation passed in 1883 that established the United States Civil Service Commission, which ended the spoils system and made merit the basis for hiring and promoting in the federal service.

Merit System

An approach to hiring and promoting government employees based on their ability and performance rather than political connections or factors.