Use the Information for the Question(s)below

question 68

Multiple Choice

Use the information for the question(s) below.
Consider an economy with two types of firms: S and U. The S firms always move together, but U firms move independently of each other. For both types of firms there is a 70% probability that the firm will have a 20% return and a 30% probability that the firm will have a -30% return.
-What is the expected return for an individual firm?

• A)14%
• B)5%
• C)3%
• D)-5%

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Definitions:

High-value

Referring to items or services that possess great monetary, instrumental, or intrinsic worth.

Low-value

Pertains to items or assets that carry a lesser worth or significance, either monetarily or in terms of utility.

Set Price

The predetermined fixed amount at which a product or service is sold to consumers.

Oral Auction

A public auction where bids are made verbally, allowing participants to increase their bids until the highest bid is reached and the item is sold.