The Operations Manager for a Well-Drilling Company Must Recommend Whether

question 63

Multiple Choice

The operations manager for a well-drilling company must recommend whether to build a new facility, expand his existing one, or do nothing. He estimates that long-run profits (in $000) will vary with the amount of precipitation (rainfall) as follows:
If he feels the chances of low, normal, and high precipitation are 30 percent, 20 percent, and 50 percent respectively, what are expected long-run profits for the alternative he will select?

• A) $140,000
• B) $170,000
• C) $285,000
• D) $305,000
• E) $475,000

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Definitions:

Import Quotas

Government-imposed limits on the volume of specific goods that can be imported, aimed at protecting domestic producers by controlling market supply.

Globalization

The integration of national economies into a worldwide economy.

American Consumer

An individual in the United States who purchases goods and services for personal use.

Frederic Bastiat

A 19th-century French economist and writer known for his advocacy of free trade and his witty criticisms of protectionism and socialism.