The Owner of Tastee Cookies Needs to Decide Whether to Lease

question 58

Multiple Choice

The owner of Tastee Cookies needs to decide whether to lease a small, medium, or large new retail outlet. She estimates that monthly profits will vary with demand for her cookies as follows: $\begin{array}{|l|l|l|l|}\hline\text {SIZE}\\\text {OF}&\text {DEMAND}\\\hline \text { OUTLET } & \text { LOW } && \text { HIGH } \\\hline \text { Small } & \$ 1,000 && 1,000 \\\hline \text { Medium } & 500 && 2,500 \\\hline \text { Large } & 0 && 3,000 \\\hline\end{array}$ For what range of probability that demand will be high, will she decide to lease the medium facility?

• A) 0-.25
• B) 0-.33
• C) .25-.5
• D) .33-1
• E) .5-1

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Definitions:

Relative Certainty

The degree of confidence or assurance one has regarding the occurrence of an event or the truth of a statement, often compared to other scenarios or information.

Licensing Agreement

An agreement in which the owner of intellectual property grants another person (or another company) permission to produce that product.

Intellectual Property

Intellectual property refers to creations of the mind, such as inventions; literary and artistic works; designs; and symbols, names and images used in commerce.

Production

The process of creating, manufacturing, or using various factors of production to make goods or provide services.