Consider the owner-operator case, in which an entrepreneur uses his/her own mone

Question

Consider the owner-operator case, in which an entrepreneur uses his/her own money in order to undertake an investment project. Select the correct statements. Select one or more a, f represents the rate of return that the investment will yield if the machine does not break. b. The faster An (the owner operator) runs the machine, the more he can produce. But the faster he runs it, the more likely the machine is to break. f is the probability that the machine will break. d, is a constant representing the quality of the project. e. The owner-operator will minimize f (the probability of failure). f. f is the speed at which the machine runs.

Explanation / Answer

1. Correct options: (a) ; (b) and (e)

2. Correct option: (b)

The given graph shows tradeoff between risk-return. In this case, risk is of machine breaking down.

Return is the profit from operating the machine.

The owner's sole purpose is to maximize returns or profits.

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