Ray Crofford Is Evaluating Investment Alternatives for the $100,000 Which

question 44

Multiple Choice

Ray Crofford is evaluating investment alternatives for the $100,000 which he inherited from his grandfather.His investment advisor has identified two alternatives and constructed the following tables which show (1) expected profits (in $10,000's) for various market conditions and their probabilities,and (2) the advisor's track record on predicting Bull and Bear markets. If the advisor predicts a Bear market the revised probability of a Bear market,P (S2|F2) ,is ________.

• A)0.524
• B)0.636
• C)0.784
• D)0.812
• E)0.000

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Definitions:

Economic Profits

Profits exceeding the total costs of production, including both explicit and implicit costs, representing gains above what could be earned in the next best alternative use of resources.

Pure Monopolist

A market participant who exclusively controls the supply of a particular good or service, without competition or substitute products.

ATC

Average Total Cost, which represents the per-unit cost of production, including both fixed and variable costs.