Use the Following to Answer Questions

question 347

Multiple Choice

Use the following to answer questions:
-(Table: Cakes) Look at the table Cakes. Pat is opening a bakery to make and sell special birthday cakes. She is trying to decide how many mixers to purchase. Her estimated fixed and average variable costs if she purchases one, two, or three mixers are shown in the table. Assume that average variable costs do not vary with the quantity of output. If Pat purchases three mixers and bakes 100 cakes per day, what is her average fixed cost?

• A) $4
• B) $25
• C) $2,496
• D) $10,000

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Definitions:

Risk-Averse

The characteristic of preferring to avoid risk, typically by choosing more certain outcomes over those with potentially higher but risky returns.

Positively Correlated Events

Situations or variables that move in the same direction, implying that as one increases, the other also increases.

Diversification

A risk management strategy that involves allocating investments among various financial instruments, industries, or other categories to minimize risk.

Expected Value

A calculated average of all possible values for a random variable, weighted by their probabilities of occurrence.