A Company Wants to Add a New Product to Its

question 75

Multiple Choice

A company wants to add a new product to its existing line of products.There are two similar candidate products A and B The demand for the new product could be high,medium,or low with probabilities of .25,.5,and .25 respectively.The demand and the corresponding profit for each product is: $$\begin{array} { | l | l | l | l | } \hline & \text { High } & \text { Medium } & \text { Low } \\\hline \text { Product A } & 40,000 & 30,000 & 20,000 \\\hline \text { Product B } & 70,000 & 20,000 & 0 \\\hline\end{array}$$ Based on the expected value criterion,which product should be chosen?

• A)Product A
• B)Product B
• C)Either product since they have the same expected demand.
• D)Expected demand cannot be used as a basis of decision.

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Definitions:

Goal-Oriented

Focused on setting and achieving specific objectives or targets, often within a defined timeline or set of conditions.

Drive Theory

A psychological theory that attributes motivation to be the result of biological or physiological needs that drive behavior towards satisfying those needs.

Expectancy Theory

A motivation theory that explains how individuals choose behaviors, predicting that people will choose the behavior that entails the most desirable outcomes to them.

Self-Interest Theory

A theory suggesting that human actions are motivated by personal gain, positing that individuals are primarily driven by self-serving interests even in decisions that appear altruistic.