ABC Co. is considering a new consumer product. They believe there is a probability with a competitive product. If ABC introduces a low-value product and XYZ introduces a competitive product, ABC's expected loss will be $10,000. and if XYZ does not introduce a competitive product, ABC expects a profit of $35,000. If ABC introduces its high-value product and XYZ follows with a competitive product then ABC expects a profit of $30,000, on the other hand, if XYZ does not come out with the competitive product, the profit of ABC is expected to E $80,000. Express the above problem in a pay-off matrix (tabular) form.
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- An author is trying to choose between two publishing companies that are competing for the marketing rights to her new novel. Company A has offered the author $10,000 plus $2 per book sold. Company B has offered the author $2,000 plus $4 per book sold. The author believes that four levels of demand for the book are possible are: 1,000, 2,000, 3000 and 5000 books are sold. If the probabilities of each level of demand are as follows: Demand Probability 1000 0.31 2000 0.32 3000 0.25 5000 0.12 Construct the payoff table for each level of demand for company X and company Y. What are the expected monetary value (EMV) and expected opportunity loss (EOL)? Hence determine the best decision that this author should do.You are currently a worker earning $60,000 per year but are considering becoming an entrepreneur.You will not switch unless you earn an accounting profit that is on average at least as great as your current salary. You look into opening a small grocery store. Suppose that the store has annual costs of $150,000 for labor, $50,000 for rent and $40,000 for equipment. There is a one half probability that revenues will be $210,000 and a one half probability that revenues will be $410,000. Your economis profit? Suppose the government imposes a 25 percent tax on accounting profits. This tax is only levied if a firm is earning positive accounting profits. What will your after tax accounting profit be in the low revenue case? In the high revenue case? What will your average after tax accounting profit be?"Jay, a writer of novels, just has completed a new thriller novel. A movie company and a TV network both want exclusive rights to market his new title. If he signs with the network, he will receive a single lump sum of $1,480,000, but if he signs with the movie company, the amount he will receive depends on how successful the movie is at the box office.The probability of a small box office earning $203,000 is 0.27. The probability of a medium box office of $1,660,000 is 0.49, and the probability of a large box office of $2,950,000 is 0.24.Jay can send his novel to a prominent movie critic to assess the potential box office success. It will cost $20,000 to get the novel evaluated by the movie critic.The movie critic can have either a favorable or unfavorable opinion. The movie critic's reliability of predicting box office success is as follows.If the movie will have a large box office, there is a 0.75 probability the critic will have a favorable opinion.If the movie will have a medium…
- "Jay, a writer of novels, just has completed a new thriller novel. A movie company and a TV network both want exclusive rights to market his new title. If he signs with the network, he will receive a single lump sum of $1,460,000, but if he signs with the movie company, the amount he will receive depends on how successful the movie is at the box office.The probability of a small box office earning $210,000 is 0.27. The probability of a medium box office of $1,530,000 is 0.64, and the probability of a large box office of $3,190,000 is 0.09.Jay can send his novel to a prominent movie critic to assess the potential box office success. It will cost $21,000 to get the novel evaluated by the movie critic.The movie critic can have either a favorable or unfavorable opinion. The movie critic's reliability of predicting box office success is as follows.If the movie will have a large box office, there is a 0.61 probability the critic will have a favorable opinion.If the movie will have a medium…You take a position with a large real estate development company as your first job after graduation. Your first big assignment is to sell an office building – you have been informed the company’s cost into the building (and the bottom line price it is willing to accept) is $400,000. You have identified a likely buyer and you assess that his top price is either $500,000 with a probability of .3, $600,000 with a probability of .5, or $1,000,000 with a probability of .2. You have to commit to a posted price – what price will maximize your profitability?You are currently a worker earning $60,000 per year but are considering becoming an entrepreneur. You will not switch unless you earn an accounting profit that is on average at least as great as your current Salary. You look into opening a small grocery store. Suppose that the store has annual cost of $150,000 for labor, $60,000 for rent and $30,000 for equipment. There is one-half probability that revenues will be $20,000 and a half probability that revenue will be $420,000 a. WHat is your accounting and economic profit? b. Will you quit your job and try your hand at being an entrepreneur? c. Suppose the government imposes a 25 percent tax on accounting profits: this tax is only levied if a firm is earning positive accounting profits. What will your after tax accounting profit be in the low revenue case?
- You are currently a worker earning $60,000 per year but are considering becoming an entrepreneur. You will not switch unless you earn an accounting profit that is on average at least as great as your current Salary. You look into opening a small grocery store. Suppose that the store has annual cost of $150,000 for labor, $60,000 for rent and $30,000 for equipment. There is one-half probability that revenues will be $20,000 and a half probability that revenue will be $420,000 a. In the low revenue Situation, what will your accounting profit or loss be? b. In the high revenue situation, what will your accounting profit or loss be? c. On average, how much do you expect your revenue to be?You are currently a worker earning $60,000 per year but are considering becoming an entrepreneur. You will not switch unless you earn an accounting profit that is on average at least as great as your current Salary. You look into opening a small grocery store. Suppose that the store has annual cost of $150,000 for labor, $60,000 for rent and $30,000 for equipment. There is one-half probability that revenues will be $20,000 and a half probability that revenue will be $420,000 a. In the high revenue case? what will your average after tax Accounting profit be? hat about your average after tax economic profit? will you Want to quit your job and try your hand at being an entrepreneur? other things equal, does the imposition of the 25 percent profit tax increase or decrease the supply of entrepreneurship in the economy?Consider the lottery that assigns a probability r of obtaining a level of consumption CH and a probability 1-T of obtaining a low level of consumption cL an individual facing such a lottery with utility function u(c) that has the properties that more is better (that is, a strictly positive marginal utility of consumption at all levels of c) and diminishing marginal utility of consumption, u"(c) CL. Consider du(c) for the first derivative of the utility function with respect to dc d²u(c) dc2 du' (c) consumption and u"(c) which is also the derivative of the first derivative of the utility function). to be the second derivative of the utility function dc
- Question 2. In an industry, there is an incumbent firm (Firm 1) and there is a potential entrant firm (Firm 2). Firm 1 decides whether to build a new plant, and simultaneously Firm 2 decides whether to enter into this industry. The cost of building a new plant for Firm 1 can be high or low, which is Firm 1's private information. Firm 2 is uncertain about Firm 1's cost, and believes that with probability TE [0, 1] the building cost for Firm 1 is high, and low with probability 1-7. The payoffs are depicted below. Build Not Build Enter 0, -1 2,1 Not Enter 2,0 3,0 High Cost Build Not Build 1 Enter 1.5, -1 2,1 Not Enter 3.5,0 3,0 Low Cost This interaction comprise a Bayesian game. Firm 2 does not know the matrix in which they are in, but Firm 1 does now it. As we have seen in class, there are 5 things that define this Bayesian game. 1. Set of players: N {Firm 1, Firm 2}. = 2. Set of actions for each player: A₁ = {Build, Not Build}, A2 3. Type space of Firm 1: ₁ = {H, L}. {Enter, Not Enter}.…Eunice, the industry analyst of H&M, wants to determine the propensity of Major Clothingcompanies toward risk. She was able to determine the utility distribution of H&M, Uniqloand Dickies. For H&M, If the expected payoff of a venture is a loss of 125,000, the utilityvalue is 0.00, if a loss of 75,000, the utility value is .2, if breakeven, the utility value is .5,if gain of 75,000 .8 and if gain of 125,000 utility value is 1. For Uniqlo, if loss of 125,000utility value is 0, if loss of 75,000 utility value is .1, breakeven is .4, if a gain of 75,000,utility value is .7 and if gain of 125,000 utility value is 1. For Dickies, if loss of 125,000,utility value is 0, if loss of 75,000, utility value is .3 breakeven is .6, if gain of 75,000, utilityvalue is .9 and gain of 125,000, utility value is 1. What is the propensity to risk of the threeinternet companies? Explain your graph.A Bank has foreclosed on a home mortgage and is selling the house at auction. There are two bidders for the house, Zeke and Heidi. The bank does not know the willingness to pay of these three bidders for the house, but on the basis of its previous experience, the bank believes that each of these bidders has a probability of 1/3 of valuing it at $800,000, a probability of 1/3 of valuing at $600,000, and a probability of 1/3 of valuing it at $300,000. The bank believes that these probabilities are independent among buyers. If the bank sells the house by means of a second- bidder, sealed-bid auction, what will be the bank’s expected revenue from the sale? The answer is 455, 556. Please show the steps in details thank you!