On January 1, 20Y5, Fahad Ali established Mountain Top Realty, which completed the following transactions during the month:
1 answer:
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Answer:
The correct answer is option A.
Explanation:
The demand for cantaloupes is unitary elastic at price level $2.50. The demand curve here is linear and downward sloping. The elasticity of demand is 1.
In this linear demand curve the lower portion will represent inelastic demand.
When the price level is reduced to $2 the demand will move to the lower portion of the curve, with fall in price and increase in demand.
So, at $2 price the demand will be inelastic, which means it will be between 0 and 1.
Answer:
The best choice is process A since it has the highest EMV of $330000
Explanation:
there is a 50% chance that they will sell 50,000 units, and a 50% chance that they will sell 100,000 units
The decision tree is attached below, the calculations for the decision tree is given as:
The item sells for $10. Process A requires an investment of $120,000 for design and equipment, but results in a $4 per unit cost.
If there is high demand, they will sell 100,000 units, The profit = 100000($10-$4) - $120000 = $480000.
If there is low demand, they will sell 50,000 units, The profit = 50000($10-$4) - $120000 = $180000.
The EMV of process A = 0.5($480000) + 0.5($180000) = $330000
Process B requires only a $100,000 investment, but its per unit cost is $5
If there is high demand, they will sell 100,000 units, The profit = 100000($10-$5) - $100000 = $400000.
If there is low demand, they will sell 50,000 units, The profit = 50000($10-$5) - $100000 = $150000.
The EMV of process B = 0.5($400000) + 0.5($150000) = $275000
If the item is outsourced, there is virtually no cost other than the $6 per unit that they would pay their supplier
If there is high demand, they will sell 100,000 units, The profit = 100000($10-$6) = $400000.
If there is low demand, they will sell 50,000 units, The profit = 50000($10-$6) = $200000.
The EMV of Buying = 0.5($400000) + 0.5($200000) = $300000
The best choice is process A since it has the highest EMV
