Case 1 ATLAS POTS LIMITED COMPANY Atlas Pots Limited produces stainless steel po

Question

Case 1
ATLAS POTS LIMITED COMPANY
Atlas Pots Limited produces stainless steel pots and pans. AtlasPots Limited
can pursue either of two distribution plans for the coming year.The firm can
either produce pots and pans for sale under a discount store labelor
manufacture a higher quality line for specialty stores andexpensive mail order
catalogs. High initial set up costs along with Atlas Pots limitedcapacity make it
impossible for the firm to produce both lines. Profits under eachplan depend
upon the state of the economy. One of three conditions willprevail:
The outcome under each plan for each state of the economy is givenin the table
below. Figures in the table are profits measured in dollars. Theprobabilities for
each economic condition represent crude estimates.
Economic
Conditions
Discount Line
outcomes ($)
Specialty Line
outcomes ($)
Growth 220,100 230,760
Normal 178,988 162,000
Recession 140,000 20,850
Economic Conditions Probability
Growth 0.3
Normal 0.5
Recession 0.2

Read the above case study carefully and write down the correctoption
number (e-g A, B, C, D) in the given Excel file.
1. The expected value for the Atlas Pots Limited in case ofdiscount line will
be:
Marks: 2
A. 172512
B. 183524
C. 189530
D. 199230
2. Using the Specialty Line outcomes, the expected value for theAtlas Pots
Limited will be:
Marks: 2
A. 141343
B. 151245
C. 154398
D. 166658
3. The variance of profits in case of discount line outcome willbe:
Marks: 5
A. 782529468
B. 790496496
C. 801235659
D. 823526908
4. The standard deviation of profits for Specialty line outcomewill be:
Marks: 5
A. 73111.2534
B. 76225.6326
C. 80212.5632
D. 81396.5842
5. The standard deviation of profits for the Discount line outcomewill be:
Marks: 2
A. 24382.51
B. 25121.85
C. 26258.58
D. 28115.77

6. Base on the calculations of standard deviation in both cases,which of
the following statements is TRUE:
Marks: 2
A. Discount line is more risky.
B. Specialty line is more risky.
C. Level of risk is same in both cases.
D. Level of risk can not be determined through thesecalculations.
7. What is the advantage of the standard deviation over theaverage
deviation?
Marks: 2
A. Because the standard deviation requires squaring of deviationsbefore
further computation, positive and negative deviations do not cancelout.
B. Because the standard deviation does not require squaring ofdeviations, it
is easy to tell whether deviations are positive or negative.
C. The standard deviation expresses the average deviation inpercentage
terms, so that different choices can be more easily compared.
D. The standard deviation transforms subjective probabilities intoobjective
ones so that calculations can be performed. Case 2
UPHEAVAL IN THE WORLD OIL MARKET
Since in the early 1970’s, the world oil market has beenbuffeted by the OPEC
cartel and by political turmoil in the Persian Gulf. In 1974, bycollectively
restraining output, OPEC (the Organization of Petroleum ExportingCountries)
pushed world oil prices well above what they would have been in acompetitive
market. OPEC could do this because it accounted for much of worldoil
production. During 1979-1980, oil prices shot up again, as theIranian revolution
and the outbreak of the Iran-Iraq war sharply reduced Iranian andIraqi
production. During1980’s the price gradually decline, asdemand fell and
competitive (i.e; non-OPEC) supply rose in response to price.Prices remained
relatively stable during 1988-1999, except for a temporary spike in1990 following
the Iraqi invasion of Kuwait, a decline during 1997-1998 and anincrease in 1999.
The following equations represent the demand and supply of oilmarket in 1995.
D = 21.08 - 0.06P
S = 19.74 + 0.07P
Where P represents the price of oil.
Saudi Arabia is one of the world’s largest oil producers,accounting for roughly 3
billion barrel per year (bb/yr), which is nearly one third of OPECproduction and
about 13 percent of total world production. Because of war orpolitical upheaval,
Saudi Arabia stopped producing oil. The new demand and supplyfunctions of oil
market after this reduction in supply are:
D = 21.08 – 0.06P
S = 16.74 + 0.07P

Read the above case study carefully and write down the correctoption
number (e-g A, B, C, D) in the given Excel file.
8. Using the demand and supply functions of oil estimated in 1995,the
market clearing price and quantity respectively are:
Marks: 3
A. $ 9.62, 20.5028 bb
B. $ 10.30, 20.462 bb
C. $ 11.78, 20.3732 bb
D. $ 12.22, 20.3468 bb
9. At market clearing level of price and quantity, the reasonableestimate
for the price elasticity of supply for oil market is:
Marks: 2
A. 0.023
B. 0.035
C. 0.158
D. - 0.230
10. After the reduction in supply by Saudi Arabia, what would bemarket
clearing price and quantity demanded in oil market:
Marks: 3
A. $30.22, 19.2668 bb
B. $ 32.69, 19.1186 bb
C. $ 33.38, 19.0722bb
D. $ 35.89, 18.9266 bb
11. Refer to the above scenario, if supply decreases and demandremains
unchanged, equilibrium quantity will _______ and equilibrium pricewill
______________.
Marks: 1
A. Rise, rise
B. Fall, fall
C. Fall, rise
D. Rise, fall

12. Assume that the current market price is below the marketclearing level.
We would expect:
Marks: 1
A. A surplus to accumulate.
B. Downward pressure on the current market price.
C. Upward pressure on the current market price.
D. Lower production during the next time period. Case 1
ATLAS POTS LIMITED COMPANY
Atlas Pots Limited produces stainless steel pots and pans. AtlasPots Limited
can pursue either of two distribution plans for the coming year.The firm can
either produce pots and pans for sale under a discount store labelor
manufacture a higher quality line for specialty stores andexpensive mail order
catalogs. High initial set up costs along with Atlas Pots limitedcapacity make it
impossible for the firm to produce both lines. Profits under eachplan depend
upon the state of the economy. One of three conditions willprevail:
The outcome under each plan for each state of the economy is givenin the table
below. Figures in the table are profits measured in dollars. Theprobabilities for
each economic condition represent crude estimates.
Economic
Conditions
Discount Line
outcomes ($)
Specialty Line
outcomes ($)
Growth 220,100 230,760
Normal 178,988 162,000
Recession 140,000 20,850
Economic Conditions Probability
Growth 0.3
Normal 0.5
Recession 0.2

Read the above case study carefully and write down the correctoption
number (e-g A, B, C, D) in the given Excel file.
1. The expected value for the Atlas Pots Limited in case ofdiscount line will
be:
Marks: 2
A. 172512
B. 183524
C. 189530
D. 199230
2. Using the Specialty Line outcomes, the expected value for theAtlas Pots
Limited will be:
Marks: 2
A. 141343
B. 151245
C. 154398
D. 166658
3. The variance of profits in case of discount line outcome willbe:
Marks: 5
A. 782529468
B. 790496496
C. 801235659
D. 823526908
4. The standard deviation of profits for Specialty line outcomewill be:
Marks: 5
A. 73111.2534
B. 76225.6326
C. 80212.5632
D. 81396.5842
5. The standard deviation of profits for the Discount line outcomewill be:
Marks: 2
A. 24382.51
B. 25121.85
C. 26258.58
D. 28115.77

6. Base on the calculations of standard deviation in both cases,which of
the following statements is TRUE:
Marks: 2
A. Discount line is more risky.
B. Specialty line is more risky.
C. Level of risk is same in both cases.
D. Level of risk can not be determined through thesecalculations.
7. What is the advantage of the standard deviation over theaverage
deviation?
Marks: 2
A. Because the standard deviation requires squaring of deviationsbefore
further computation, positive and negative deviations do not cancelout.
B. Because the standard deviation does not require squaring ofdeviations, it
is easy to tell whether deviations are positive or negative.
C. The standard deviation expresses the average deviation inpercentage
terms, so that different choices can be more easily compared.
D. The standard deviation transforms subjective probabilities intoobjective
ones so that calculations can be performed. Case 2
UPHEAVAL IN THE WORLD OIL MARKET
Since in the early 1970’s, the world oil market has beenbuffeted by the OPEC
cartel and by political turmoil in the Persian Gulf. In 1974, bycollectively
restraining output, OPEC (the Organization of Petroleum ExportingCountries)
pushed world oil prices well above what they would have been in acompetitive
market. OPEC could do this because it accounted for much of worldoil
production. During 1979-1980, oil prices shot up again, as theIranian revolution
and the outbreak of the Iran-Iraq war sharply reduced Iranian andIraqi
production. During1980’s the price gradually decline, asdemand fell and
competitive (i.e; non-OPEC) supply rose in response to price.Prices remained
relatively stable during 1988-1999, except for a temporary spike in1990 following
the Iraqi invasion of Kuwait, a decline during 1997-1998 and anincrease in 1999.
The following equations represent the demand and supply of oilmarket in 1995.
D = 21.08 - 0.06P
S = 19.74 + 0.07P
Where P represents the price of oil.
Saudi Arabia is one of the world’s largest oil producers,accounting for roughly 3
billion barrel per year (bb/yr), which is nearly one third of OPECproduction and
about 13 percent of total world production. Because of war orpolitical upheaval,
Saudi Arabia stopped producing oil. The new demand and supplyfunctions of oil
market after this reduction in supply are:
D = 21.08 – 0.06P
S = 16.74 + 0.07P

Read the above case study carefully and write down the correctoption
number (e-g A, B, C, D) in the given Excel file.
8. Using the demand and supply functions of oil estimated in 1995,the
market clearing price and quantity respectively are:
Marks: 3
A. $ 9.62, 20.5028 bb
B. $ 10.30, 20.462 bb
C. $ 11.78, 20.3732 bb
D. $ 12.22, 20.3468 bb
9. At market clearing level of price and quantity, the reasonableestimate
for the price elasticity of supply for oil market is:
Marks: 2
A. 0.023
B. 0.035
C. 0.158
D. - 0.230
10. After the reduction in supply by Saudi Arabia, what would bemarket
clearing price and quantity demanded in oil market:
Marks: 3
A. $30.22, 19.2668 bb
B. $ 32.69, 19.1186 bb
C. $ 33.38, 19.0722bb
D. $ 35.89, 18.9266 bb
11. Refer to the above scenario, if supply decreases and demandremains
unchanged, equilibrium quantity will _______ and equilibrium pricewill
______________.
Marks: 1
A. Rise, rise
B. Fall, fall
C. Fall, rise
D. Rise, fall

12. Assume that the current market price is below the marketclearing level.
We would expect:
Marks: 1
A. A surplus to accumulate.
B. Downward pressure on the current market price.
C. Upward pressure on the current market price.
D. Lower production during the next time period. Case 2
UPHEAVAL IN THE WORLD OIL MARKET
Since in the early 1970’s, the world oil market has beenbuffeted by the OPEC
cartel and by political turmoil in the Persian Gulf. In 1974, bycollectively
restraining output, OPEC (the Organization of Petroleum ExportingCountries)
pushed world oil prices well above what they would have been in acompetitive
market. OPEC could do this because it accounted for much of worldoil
production. During 1979-1980, oil prices shot up again, as theIranian revolution
and the outbreak of the Iran-Iraq war sharply reduced Iranian andIraqi
production. During1980’s the price gradually decline, asdemand fell and
competitive (i.e; non-OPEC) supply rose in response to price.Prices remained
relatively stable during 1988-1999, except for a temporary spike in1990 following
the Iraqi invasion of Kuwait, a decline during 1997-1998 and anincrease in 1999.
The following equations represent the demand and supply of oilmarket in 1995.
D = 21.08 - 0.06P
S = 19.74 + 0.07P
Where P represents the price of oil.
Saudi Arabia is one of the world’s largest oil producers,accounting for roughly 3
billion barrel per year (bb/yr), which is nearly one third of OPECproduction and
about 13 percent of total world production. Because of war orpolitical upheaval,
Saudi Arabia stopped producing oil. The new demand and supplyfunctions of oil
market after this reduction in supply are:
D = 21.08 – 0.06P
S = 16.74 + 0.07P

Read the above case study carefully and write down the correctoption
number (e-g A, B, C, D) in the given Excel file.
8. Using the demand and supply functions of oil estimated in 1995,the
market clearing price and quantity respectively are:
Marks: 3
A. $ 9.62, 20.5028 bb
B. $ 10.30, 20.462 bb
C. $ 11.78, 20.3732 bb
D. $ 12.22, 20.3468 bb
9. At market clearing level of price and quantity, the reasonableestimate
for the price elasticity of supply for oil market is:
Marks: 2
A. 0.023
B. 0.035
C. 0.158
D. - 0.230
10. After the reduction in supply by Saudi Arabia, what would bemarket
clearing price and quantity demanded in oil market:
Marks: 3
A. $30.22, 19.2668 bb
B. $ 32.69, 19.1186 bb
C. $ 33.38, 19.0722bb
D. $ 35.89, 18.9266 bb
11. Refer to the above scenario, if supply decreases and demandremains
unchanged, equilibrium quantity will _______ and equilibrium pricewill
______________.
Marks: 1
A. Rise, rise
B. Fall, fall
C. Fall, rise
D. Rise, fall

12. Assume that the current market price is below the marketclearing level.
We would expect:
Marks: 1
A. A surplus to accumulate.
B. Downward pressure on the current market price.
C. Upward pressure on the current market price.
D. Lower production during the next time period.

Explanation / Answer

1. Do the first Quiz with the E.V formula. E.V = Probability(Growth) + Pro(Normal) + Pro (Recession) E.V = 0.3(220,100) + 0.5( 178988) + 0.2 ( 140000) Now solve it. And check the amounts again. 2. Do the quiz as same as Quiz No.1 just change the amounts. 3. Quiz use the variance formula and the answer will be option "B".but check the amounts again because it can may be any erroromitted. 4. Use the Standard Deviation Formula. 5. Take square root of the quiz no. 3 answer option No " B". U canfind the answer easily . 6. After taking the answers of quiz No. 4 and 5 u can judge thatwhich one deviation is lower than other. So, which is lower that isless risky. 7. Its a role of deviation that means lower rate is morebetter. 8. use the function of demand and supply for taking price. 9. use the formula of price elasticity of supply. 11. Quantity Fall price will Increase.

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.