John Is Trying to Decide Whether to Expand His Business

question 91

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 he will earn $100,000 and a 50 percent chance he will earn $300,000.If he does expand,there is a 30 percent chance he will earn $100,000,a 30 percent chance he will earn $300,000 and a 40 percent chance he will earn $500,000.It will cost him $150,000 to expand.To make the best decision,John should compare:

• A) the expected value of his earnings if he doesn't expand with the expected value of his earnings if he does expand.
• B) the difference in expected earnings if he does or does not expand to the cost of expansion.
• C) the expected value of his earnings if he expands to the cost of expansion.
• D) None of these statements is true.

Comprehend the significance of social intelligence in effective communication.

Identify the roles of sender and recipient in the business communication process.

Recognize the importance of proper interpretation of messages for effective communication.

Understand the structure and purpose of formal operational communication networks in businesses.

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Definitions:

Profit Maximizes

A strategy or objective of businesses to achieve the highest possible profit, where total revenue exceeds total costs by the largest margin.

MR

Short for Marginal Revenue, it represents the additional income earned from selling one more unit of a good or service.

MC

Refers to Marginal Cost, the increase in total cost that arises from producing an additional unit of output.

Cost Curves

Graphs that depict how the costs of production vary with changes in output, including total cost, average cost, and marginal cost curves.