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.

---

Definitions:

Sequencing

The arrangement or order of actions, tasks, or processes to achieve a specific goal or outcome efficiently.

Descriptive Statistics

The branch of statistics that deals with the summarization and description of the main features of a collection of data.

Inferential Statistics

The branch of statistics that focuses on drawing conclusions about a population based on a sample drawn from it.

Longest Processing Time

A scheduling strategy in which tasks are prioritized based on those requiring the most time to complete.