A Firm Might Be Liable for $10 Million If a Lawsuit

question 27

Multiple Choice

A firm might be liable for $10 million if a lawsuit is brought against it. The firm judges that the probability the suit will be brought is .6. In addition, it believes that its chance of winning such a suit (in which case it owes $0) is .7. The firm's overall expected liability is:

• A) $6 million.
• B) $4.2 million.
• C) $3 million.
• D) $1.8 million.
• E) $1.2 million.

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Definitions:

New Deal

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