What would you expect the relationship to be between selling a high-risk product and a low-risk product using personal selling OLow risk and high-risk are equally as likely O Low-risk is more likely to be sold using personal selling High-risk is less likely to be sold using personal selling High-risk is more likely to be sold using personal selling

What would you expect the relationship to be between selling a high-risk product and a low-risk product using personal selling OLow risk and high-risk are equally as likely O Low-risk is more likely to be sold using personal selling High-risk is less likely to be sold using personal selling High-risk is more likely to be sold using personal selling

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter18: Auctions

Section: Chapter Questions

Problem 18.1IP

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Many decision problems have the following simplestructure. A decision maker has two possible decisions, 1 and 2. If decision 1 is made, a sure cost of c isincurred. If decision 2 is made, there are two possibleoutcomes, with costs c1 and c2 and probabilities p and1 2 p. We assume that c1 , c , c2. The idea is thatdecision 1, the riskless decision, has a moderate cost,whereas decision 2, the risky decision, has a low costc1 or a high cost c2.a. Calculate the expected cost from the riskydecision.b. List as many scenarios as you can think of thathave this structure. (Here’s an example to get youstarted. Think of insurance, where you pay a surepremium to avoid a large possible loss.) For eachof these scenarios, indicate whether you wouldbase your decision on EMV or on expected utility
1. 4 Input Modeling in Drug Development Cost of Drug Development Revenue 6. Effectiveness Market Share Revenue per person Number of People 9. 10 Cost Total Revenue 11 12 13 Total Profit 14 A drug company is planning to invest in a new drug. The cost of research has a uniform distribution 15 on $300,000 to $500,000. There is a 40% chance that the drug will not be effective, in which case 16 there will be no sales. If the drug is effective, then the total market for the drug is 400,000 people. The company expects their share of the market to have a triangular distribution with minimum 5%, maximum 30%, and most likely 20% of the people. For each person who uses the new drug, the 20 company expects to make $100 in sales during the first year. The drug company would like to know the distribution of profit they can expect from undertaking this investment. 17 18 19 21 22 23 24 25
a. Mayers & Smith Corp. has a fertilizer plant. The probability of an explosion at the plant depends on how much the firm spends on safety as given by the table below. If an explosion occurs, the loss to society (damaged equipment, death of employees, etc.) is expected to be $250 million. Safety Expenditure $ millions) 0.0 0.5 1.0 1.5 2.0 2.5 Probability of Loss 0.030 0.020 0.016 0.013 0.011 0.010 Find the optimal level of safety from a societal perspective correct calculation of marginal cost and marginal benefit;: correct optimal amount.
Identify and analyse the types of risks faced by lazada
How is risk related to profit? a The lower the risk, the higher the profit. b Profit has an inverse relationship to risk. c Profit can be seen as a reward for taking risks. d High-risk ventures are more likely to be successful.
2 Consider the two investments listed below with possible outcomes and probabilities: INVESTMENT (in $1000) SAFE RISKY INVESTMENT AMOUNTⓇ 40+ 40+ GOOD SCENARIO OUTCOME 45+ 80+ AVERAGE+ SCENARIO PROB OUTCOME 0.40* 0.40€ 42+ 45+ BAD+ SCENARIO PROB OUTCOME PROB 0.20 35+ 0.20 10+ 0.40€ 0.40+ b) a) Suppose I have utility function U(*) = (x)2. What is the expected utility from each investment? Which investment will I choose, if any? Show and explain your work and provide the intuition. c) What is the value of the risk premium for the SAFE investment? Show and explain your work and provide the intuition. d) What is the value of the risk premium for the RISKY investment? Show and explain your work and provide the intuition.< +
If a team from Trilogox came up with the following PFMEA exercise results during its risk exposure analysis: Risk Occurrence Probably will occur Outcome Detection Financial Cost increase by Detection method has 30% medium effectiveness Marketing Probably will not Cost increase by Detection method has medium effectiveness Cost increase by Detection method has medium effectiveness Cost increase by Detection method has 2% occur Quality Probably will occur 40% Capability Probably will occur 10% medium effectiveness Materials Probably will occur Cost increase by Detection method has medium effectiveness Cost increase by Detection method has 10% Labor Probably will occur 40% medium effectiveness b. Which are the most critical risks by identifying the critical values? What actions do you recommend? Evaluate the risks by assigning one degree of leniency in their value.
What is the risk premium(s)?
17.1You’re the manager of global opportunities for a U.S manufacturer who is considering expanding sales into Asia. Your market research has identified the market potential in Malaysia, Philippines and Singapore's described next: Big Mediocre Failure Malaysia Probability 0.3 0.3 0.4 Units 12,000,000 600,000 0 Phillipines Probability 0.3 0.5 0.2 Units 1,000,000 320,000 0 Singapore Probability 0.7 0.2 0.1 Units 700,000 400,000 0 The product sells for $10 and has unit cost of $8. If you can enter only one market, and the cost of entering the market( Regardless of which market you select) is $250,000, should you enter on of these markets? I so, which one? If you enter, what is your expected profit?
You're the manager of global opportunities for a U.S. manufacturer that is considering expanding sales into Asia. Your ma the market potential in Malaysia, the Philippines, and Singapore as described in the following table: Success Level Big Mediocre Failure Malaysia Probability 0.5 0.3 0.2 Units 500,000 300,000 0 Philippines Probability 0.2 0.7 0.1 Units 1,400,000 700,000 0 Singapore Probability Units 0.3 0.3 0.4 1,200,000 384,000 0 The product sells for $10, and each unit has a constant marginal cost of $8. Assume that the (fixed) cost of entering the market (regardless of which market you select) is $250,000. In the following table, enter the expected number of units sold, and the expected profit, from entering each market. Market Malaysia Expected Number of Units Sold Expected Profit Philippines Singapore $ If you were to enter one of the previously described markets, which one would you enter in order to earn the highest expected profit?
A gym membership charges their current members a monthly fee on the 1" of the month. Monthly churn rate (the probability of a member ending their membership) is 4%. Profit from the monthly membership fee is $10 per member; and the recruitment cost (advertising and promotions) for a new member are $200. What is the per member expected profit to the gym?