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A Company Believes That There Is a 25% Chance of Making

question 18

Essay

A company believes that there is a 25% chance of making a daily profit of $500, a 35% chance that it will be $1000 and 40% chance that it will be $1500.
a. Find the expected value.
b. Find the standard deviation.


Definitions:

Market Price

The current price at which an asset or service can be bought or sold in a given market.

Shut Down

A short-term decision by a firm to cease production due to market conditions, not covering variable costs in the short run.

Average Variable Cost

The total variable costs divided by the quantity of output produced.

Perfectly Competitive

A market structure characterized by many buyers and sellers, identical products, and free entry and exit, leading to price determination by supply and demand.

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