A Firm Is Considering the Decision of Investing in New

question 8

Multiple Choice

A firm is considering the decision of investing in new plants.It can choose no new plants,one new plant,or two new plants.The following table gives the profits for each choice under three states of the economy.The manager assigns the following probabilities to each state of the economy: the economy expands,20%,the economy contracts,40%,or the economy is unchanged 40%. Using the expected value rule which is correct? Building

• A)no new plants is better than one.
• B)one new plant is better than two.
• C)one new plant is equivalent to building two.
• D)one new plant is better than none.
• E)c and d

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Definitions:

Unemployment

The situation when individuals who are capable of working and actively seeking employment cannot find a job.

Ultimatum Game

An economic experiment and game theory scenario where two players decide how to divide a sum of money between them.

Proposals

Formal plans or suggestions put forward for consideration or discussion by others, often related to projects, research, or policy changes.

Distribution

The process of making a product or service available for consumption by a consumer or business user.