A Firm Is Considering the Decision of Investing in New

question 50

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 mean variance rules,which decision is correct?

• A)The firm should build no new plants.
• B)The firm should build one new plant.
• C)The firm should build two new plants.
• D)If deciding only between one or two new plants,the firm should build one.
• E)If deciding only between one or two new plants,the firm should build two.

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Definitions:

Marketing Segmentation

The practice of dividing a broad target market into subsets of consumers with common needs, characteristics, or behaviors, and targeting them with specific marketing strategies.

Form Utility

The value added by a company to a product or service, altering its original form to make it more desirable to consumers.

Business Products

Goods and services sold to other businesses for the production of goods, for resale, or for general business operations.

Not-for-profit Organizations

Organizations that operate for the benefit of the public or a particular social cause, without the primary goal of making a profit.