Use the Following Decision Tree to Answer the Next Question

question 15

Multiple Choice

Use the following decision tree to answer the next question.

-If the probability of Event 1 is 30% and the probability of Event 2 is 70% in the decision tree above, the expected value of Decision 1 is

• A)-10
• B)30
• C)14.5
• D)18

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Definitions:

Nondiscriminating Monopolist

Refers to a monopolist who charges all consumers the same price for its product or service, as opposed to price discrimination practices.

Pure Monopolist

A market structure where a single seller controls the entire supply of a product or service, and no close substitutes exist.

Maximum Profits

The highest level of profit a firm can achieve when it operates at its most efficient production level and pricing strategy.

Price Discriminate

The practice of selling the same product or service at different prices to different customers, not based on differences in production costs.