Consider the Disaster Risk Decision Tree Model

question 35

Multiple Choice

Consider the disaster risk decision tree model.Using the notation from the model,what is the expected monetary value (cost) of choosing two suppliers?

• A)2C
• B)[1 - P(2)] × 2C + P(2)× (L + 2C)
• C)2C + SL
• D)P(2)× 2C + [1 - P(2)] × (L + 2C)
• E)2C + (S + U2)L

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Definitions:

Nonbinding Price Floor

A minimum price set by law above which the market price can lie, without any impact on the market price because the floor is set below equilibrium.

Quantity Sold

The actual number of units of a product that have been sold in the market over a specific time period, reflecting market demand.

Market Price

The current price at which goods or services are bought and sold in a competitive marketplace.

Price Floor

A floor price established by the government or regulatory authority, representing the lowest legal selling price for a specific product or service.