Four Entrepreneurial Students Want to Open a Shaved Ice Business

question 28

Multiple Choice

Four entrepreneurial students want to open a shaved ice business during the coming summer. Maxine thinks that demand will be high and therefore they should purchase a large stand and acquire a premium ice shaving machine. Minnie feels strongly that demand will be low and that they should purchase a tarp and some basic hand tools to work the ice. Midelia is pretty sure that demand will fall in-between these two extremes, so they can get by with a shack and a used ice shaving machine. Their financial wizard of the bunch, Probableah, has estimated the costs, revenues, and likelihoods of each level of demand and created the table shown below. What is the expected profit for this venture? $$\begin{array} { | l | c | c | c | } \hline { \text { Demand } } & \text { Total Revenue } & \text { Total Expenses } & \text { Probability } \\\hline \text { Low } & \$ 500 & \$ 15 & .2 \\\hline \text { Medium } & \$ 2,000 & \$ 125 & .3 \\\hline \text { High } & \$ 5,000 & \$ 519 & .5 \\\hline\end{array}$$

• A)$1700
• B)$2300
• C)$2900
• D)$3300

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