A Share of a Restaurant Chain Can Be Worth $2

question 20

Multiple Choice

A share of a restaurant chain can be worth $2 with a probability of 0.40 and $10 with a probability of 0.60.What is the variance of the price of this share?

• A) 3
• B) 5
• C) 6
• D) 8.5

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Definitions:

Input Increases

A scenario in production or economics where the quantity of resources used in the production process is increased, potentially affecting outputs.

Price of Output

The market price at which a product or service is sold, determined by various factors including production costs, supply and demand, and market competition.

Profit-maximizing Firm

A company operated with the primary goal of making the highest possible profit, typically by adjusting outputs, prices, or inputs.

Theory of Profit-maximizing

A principle that suggests firms aim to achieve the highest possible profits by adjusting production levels, prices, or other variables.