A firm is evaluating alternatives for introducing a new product. It has identifi
ID: 3312625 • Letter: A
Question
A firm is evaluating alternatives for introducing a new product. It has identified four alternative markets, and has constructed the following table which shows the rewards (in $1,000,000's) for various levels of acceptance by the markets and their probabilities.
Market Acceptance
Market
Low (.3)
Medium (.4)
High (.3)
Northeast Only
-0.7
0
1
Southeast Only
-0.2
0.2
0.8
National
-1.5
-0.2
2
None (don't introduce the new package)
0
0
0
The expected value of introducing the new product in the “National” market is:
$70,000
$90,000
$50,000
$260,000
Market Acceptance
Market
Low (.3)
Medium (.4)
High (.3)
Northeast Only
-0.7
0
1
Southeast Only
-0.2
0.2
0.8
National
-1.5
-0.2
2
None (don't introduce the new package)
0
0
0
Explanation / Answer
Mean= -450000-80000+600000=70000
Hope this helps!
X -1500000 -200000 2000000 P(X=X) 0.3 0.4 0.3Related Questions
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