Question 1

​Six possibilities are equally likely and have payoffs of $2,$4,$6,$8,$10,and $12.The expected value is:

Accepted Answer

A) ​$4 
B) $5 
C) $6 
D) ​$7 
A) ​$4 
B) $5 
C) $6 
D) ​$7

Question 2

​Half of all your potential customers would pay $16 for your product but the other half would only pay $10.You cannot tell them apart.Your marginal costs are $4.If you set the price at $10,the expected profit is:

Accepted Answer

A) ​$3 
B) $4 
C) $5 
D) ​$6 
A) ​$3 
B) $4 
C) $5 
D) ​$6

Question 3

​Use the following information for question
Transcendent Technologies is deciding between developing a complicated thought-activated software,or a simple voice-activated software.Since the thought-activated software is complicated,it only has a 30% chance of actually going through to a successful launch,but would generate revenues of $50million if launched.The voice-activated software is simple and hence has a 80% chance of being launched but only generates a revenue of $10million.The complicated technology costs 10million,whereas the simple technology costs 2million.
-​If the simplified version costs $2 million and its probability of success is 75%,whereas the cost of the complicated version is $10million,what is the minimum probability of success for the complicated version that would make the firm indifferent between the two software?

Accepted Answer

A) ​0.3 
B) 0.31 
C) 0.32 
D) ​0.33 
A) ​0.3 
B) 0.31 
C) 0.32 
D) ​0.33

Question 4

​Two important considerations during the difference-in-difference approach are

Accepted Answer

A) ​Representativeness,Reflectiveness 
B) Injections,Leakages 
C) Representativeness,Leakages 
D) ​Reflectiveness,Injections 
A) ​Representativeness,Reflectiveness 
B) Injections,Leakages 
C) Representativeness,Leakages 
D) ​Reflectiveness,Injections

Question 5

​You are considering buying a store.The store owner shows you sales figures of the store on a "typical" day.The owner has most likely shown you figures for

Accepted Answer

A) ​The less productive day 
B) The more productive day 
C) Any typical day 
D) ​All the days that the store was owned by him 
A) ​The less productive day 
B) The more productive day 
C) Any typical day 
D) ​All the days that the store was owned by him

Question 6

​You are considering buying a store.In order to better access your return on the investment,you must ask the storeowner for the figures on days when

Accepted Answer

A) ​Sales are high,costs are low 
B) Sales are low,costs are high 
C) Both sales and costs are high 
D) ​All of the above 
A) ​Sales are high,costs are low 
B) Sales are low,costs are high 
C) Both sales and costs are high 
D) ​All of the above

Question 7

​A pharmaceutical company executive has to decide whether to fund a new drug development project.For this project,a success would earn $90 million and a failure would cost $10 million in lost profits. At what probability of expected success should she fund the project?

Accepted Answer

A) ​0.10 
B) 0.20 
C) 0.80 
D) ​0.90 
A) ​0.10 
B) 0.20 
C) 0.80 
D) ​0.90

Question 8

​We worry that false negatives occur too often relative to false positives due to

Accepted Answer

A) ​Most hypotheses being false 
B) It being appropriate to set a high standard for acceptance of a hypothesis 
C) Managers having an incentive to make a false negative conclusion because they are harder for superiors to observe 
D) ​They are not too common 
A) ​Most hypotheses being false 
B) It being appropriate to set a high standard for acceptance of a hypothesis 
C) Managers having an incentive to make a false negative conclusion because they are harder for superiors to observe 
D) ​They are not too common

Question 9

​You can either invest in project A or B.Project A could have a value of $150 with a probability of 0.1 or a value of $75 with probability 0.9.Project B could have a value of $120 with probability 0.2 or a value of $75 with a probability of 0.8.Which project should you invest in?

Accepted Answer

A) ​Project A 
B) Project B 
C) Neither of the projects 
D) ​You cannot tell from the information presented 
A) ​Project A 
B) Project B 
C) Neither of the projects 
D) ​You cannot tell from the information presented

Question 10

​Four possibilities have probabilities 0.4,0.2,0.2 and 0.2 and values $20,$20,$40,and $40 respectively.The expected value is:

Accepted Answer

A) ​$22 
B) $24 
C) $26 
D) ​$28 
A) ​$22 
B) $24 
C) $26 
D) ​$28

Question 11

​Type I errors are

Accepted Answer

A) ​False negatives 
B) False positives 
C) True negatives 
D) ​True positives 
A) ​False negatives 
B) False positives 
C) True negatives 
D) ​True positives

Question 12

​The key distinction between risk and uncertainty is

Accepted Answer

A) ​Risk cannot be quantified,priced or traded 
B) Uncertainty refers to not knowing possible outcomes or their probabilities 
C) Uncertainty is modeled by listing the possible outcomes and assigning probabilities to the outcomes 
D) ​Risk has to do with not knowing the probability distribution of a random variable 
A) ​Risk cannot be quantified,priced or traded 
B) Uncertainty refers to not knowing possible outcomes or their probabilities 
C) Uncertainty is modeled by listing the possible outcomes and assigning probabilities to the outcomes 
D) ​Risk has to do with not knowing the probability distribution of a random variable

Question 13

​Use the following information for question
Transcendent Technologies is deciding between developing a complicated thought-activated software,or a simple voice-activated software.Since the thought-activated software is complicated,it only has a 30% chance of actually going through to a successful launch,but would generate revenues of $50million if launched.The voice-activated software is simple and hence has a 80% chance of being launched but only generates a revenue of $10million.The complicated technology costs 10million,whereas the simple technology costs 2million.
-​Of the two software options,complicated software,now costing $15.5 million with a probability of success at 50%,and the simplified software,with a probability of a success at 65%,which one would the firm choose to develop if it can develop only one?

Accepted Answer

A) ​The simple voice-activated software 
B) The complicated thought-activated software 
C) Neither of the software 
D) ​Need more information 
A) ​The simple voice-activated software 
B) The complicated thought-activated software 
C) Neither of the software 
D) ​Need more information

Question 14

​In a coin toss bet,where both heads and tails are equally likely,you win a $3 on heads but lose $1 on tails.The expected value of the bet is

Accepted Answer

A) ​$0.50 
B) -$0.50 
C) $1.00 
D) ​$0.00 
A) ​$0.50 
B) -$0.50 
C) $1.00 
D) ​$0.00

Question 15

​A "false positive" is

Accepted Answer

A) ​When you incorrectly conclude that your hypothesis is true 
B) When you incorrectly conclude that your hypothesis is false 
C) When you correctly conclude that your hypothesis is true 
D) ​When you correctly conclude that your hypothesis is false 
A) ​When you incorrectly conclude that your hypothesis is true 
B) When you incorrectly conclude that your hypothesis is false 
C) When you correctly conclude that your hypothesis is true 
D) ​When you correctly conclude that your hypothesis is false

Question 16

​The VP in charge of product launches hypothesizes that a particular product would be profitable,then launching an unprofitable product is a

Accepted Answer

A) ​Type I error 
B) Type II error 
C) Type III error 
D) ​Type IV error 
A) ​Type I error 
B) Type II error 
C) Type III error 
D) ​Type IV error

Question 17

​When a variable can take on different values

Accepted Answer

A) ​it is a random variable 
B) it is a dependent variable 
C) it is an dummy variable 
D) ​it is an endogenous variable 
A) ​it is a random variable 
B) it is a dependent variable 
C) it is an dummy variable 
D) ​it is an endogenous variable

Question 18

You put your product on 20% off sale market A but leave it unchanged in market B.Sales in A increase from 840 to 1040 units per week while sales in B rise from 770 to 830.The Difference-in-difference estimate of the effect of the price change is:

Accepted Answer

A) ​80 units 
B)  
100 units 
C) 120 units 
D) ​130 units 
A) ​80 units 
B)  
100 units 
C) 120 units 
D) ​130 units

Question 19

​Use the following information for question
Transcendent Technologies is deciding between developing a complicated thought-activated software,or a simple voice-activated software.Since the thought-activated software is complicated,it only has a 30% chance of actually going through to a successful launch,but would generate revenues of $50million if launched.The voice-activated software is simple and hence has a 80% chance of being launched but only generates a revenue of $10million.The complicated technology costs 10million,whereas the simple technology costs 2million.
-​If the simplified technology costs $2 million to develop,what is the expected gain from developing the voice activated software

Accepted Answer

A) ​$5million 
B) $6million 
C) $7million 
D) ​$10million 
A) ​$5million 
B) $6million 
C) $7million 
D) ​$10million

Question 20

​You expect one-third of your customers to be high value,willing to pay $9 for your product,and the other two-thirds to be low value customers willing to pay only $3.You cannot tell them apart.If the product costs $3,and you charge $9,what is your expected profit?

Accepted Answer

A) ​$1 
B) $2 
C) $3 
D) ​$4 
A) ​$1 
B) $2 
C) $3 
D) ​$4

Six possibilities are equally likely and have payoffs of $2,$4,$6,$8,$10,and $12.The expected value is:

Half of all your potential customers would pay $16 for your product but the other half would only pay $10.You cannot tell them apart.Your marginal costs are $4.If you set the price at $10,the expected profit is:

Two important considerations during the difference-in-difference approach are

You are considering buying a store.The store owner shows you sales figures of the store on a "typical" day.The owner has most likely shown you figures for

You are considering buying a store.In order to better access your return on the investment,you must ask the storeowner for the figures on days when

A pharmaceutical company executive has to decide whether to fund a new drug development project.For this project,a success would earn $90 million and a failure would cost $10 million in lost profits. At what probability of expected success should she fund the project?

We worry that false negatives occur too often relative to false positives due to

You can either invest in project A or B.Project A could have a value of $150 with a probability of 0.1 or a value of $75 with probability 0.9.Project B could have a value of $120 with probability 0.2 or a value of $75 with a probability of 0.8.Which project should you invest in?

Four possibilities have probabilities 0.4,0.2,0.2 and 0.2 and values $20,$20,$40,and $40 respectively.The expected value is:

Type I errors are

The key distinction between risk and uncertainty is

In a coin toss bet,where both heads and tails are equally likely,you win a $3 on heads but lose $1 on tails.The expected value of the bet is

A "false positive" is

The VP in charge of product launches hypothesizes that a particular product would be profitable,then launching an unprofitable product is a

When a variable can take on different values

You put your product on 20% off sale market A but leave it unchanged in market B.Sales in A increase from 840 to 1040 units per week while sales in B rise from 770 to 830.The Difference-in-difference estimate of the effect of the price change is:

You expect one-third of your customers to be high value,willing to pay $9 for your product,and the other two-thirds to be low value customers willing to pay only $3.You cannot tell them apart.If the product costs $3,and you charge $9,what is your expected profit?

The One Lessor of Business

Benefits, Costs, and Decisions

Extent How Much Decisions

Investment Decisions: Look Ahead and Reason Back

Simple Pricing

Economies of Scale and Scope

Understanding Markets and Industry Changes

Market Structure and Long Run Equilibrium

Strategy: the Quest to Keep Profit From Eroding

Foreign Exchange, Trade, and Bubbles

More Realistic and Complex Pricing

Direct Price Discrimination

Strategic Games

Bargaining

Auctions

The Problem of Adverse Selection

The Problem of Moral Hazard

Getting Employees to Work in the Firms Best Interest

Getting Divisions to Work in the Firms Best Interest

Managing Vertical Relationships

Filters

Exam 15: Making Decisions With Uncertainty

​Six possibilities are equally likely and have payoffs of $2,$4,$6,$8,$10,and $12.The expected value is:

​Half of all your potential customers would pay $16 for your product but the other half would only pay $10.You cannot tell them apart.Your marginal costs are $4.If you set the price at $10,the expected profit is:

​Two important considerations during the difference-in-difference approach are

​You are considering buying a store.The store owner shows you sales figures of the store on a "typical" day.The owner has most likely shown you figures for

​You are considering buying a store.In order to better access your return on the investment,you must ask the storeowner for the figures on days when

​A pharmaceutical company executive has to decide whether to fund a new drug development project.For this project,a success would earn $90 million and a failure would cost $10 million in lost profits. At what probability of expected success should she fund the project?

​We worry that false negatives occur too often relative to false positives due to

​You can either invest in project A or B.Project A could have a value of $150 with a probability of 0.1 or a value of $75 with probability 0.9.Project B could have a value of $120 with probability 0.2 or a value of $75 with a probability of 0.8.Which project should you invest in?

​Four possibilities have probabilities 0.4,0.2,0.2 and 0.2 and values $20,$20,$40,and $40 respectively.The expected value is:

​Type I errors are

​The key distinction between risk and uncertainty is

​In a coin toss bet,where both heads and tails are equally likely,you win a $3 on heads but lose $1 on tails.The expected value of the bet is

​A "false positive" is

​The VP in charge of product launches hypothesizes that a particular product would be profitable,then launching an unprofitable product is a

​When a variable can take on different values

You put your product on 20% off sale market A but leave it unchanged in market B.Sales in A increase from 840 to 1040 units per week while sales in B rise from 770 to 830.The Difference-in-difference estimate of the effect of the price change is:

​You expect one-third of your customers to be high value,willing to pay $9 for your product,and the other two-thirds to be low value customers willing to pay only $3.You cannot tell them apart.If the product costs $3,and you charge $9,what is your expected profit?

The One Lessor of Business

Benefits, Costs, and Decisions

Extent How Much Decisions

Investment Decisions: Look Ahead and Reason Back

Simple Pricing

Economies of Scale and Scope

Understanding Markets and Industry Changes

Market Structure and Long Run Equilibrium

Strategy: the Quest to Keep Profit From Eroding

Foreign Exchange, Trade, and Bubbles

More Realistic and Complex Pricing

Direct Price Discrimination

Strategic Games

Bargaining

Auctions

The Problem of Adverse Selection

The Problem of Moral Hazard

Getting Employees to Work in the Firms Best Interest

Getting Divisions to Work in the Firms Best Interest

Managing Vertical Relationships

Filters

Six possibilities are equally likely and have payoffs of $2,$4,$6,$8,$10,and $12.The expected value is:

Half of all your potential customers would pay $16 for your product but the other half would only pay $10.You cannot tell them apart.Your marginal costs are $4.If you set the price at $10,the expected profit is:

Two important considerations during the difference-in-difference approach are

You are considering buying a store.The store owner shows you sales figures of the store on a "typical" day.The owner has most likely shown you figures for

You are considering buying a store.In order to better access your return on the investment,you must ask the storeowner for the figures on days when

A pharmaceutical company executive has to decide whether to fund a new drug development project.For this project,a success would earn $90 million and a failure would cost $10 million in lost profits. At what probability of expected success should she fund the project?

We worry that false negatives occur too often relative to false positives due to

You can either invest in project A or B.Project A could have a value of $150 with a probability of 0.1 or a value of $75 with probability 0.9.Project B could have a value of $120 with probability 0.2 or a value of $75 with a probability of 0.8.Which project should you invest in?

Four possibilities have probabilities 0.4,0.2,0.2 and 0.2 and values $20,$20,$40,and $40 respectively.The expected value is:

Type I errors are

The key distinction between risk and uncertainty is

In a coin toss bet,where both heads and tails are equally likely,you win a $3 on heads but lose $1 on tails.The expected value of the bet is

A "false positive" is

The VP in charge of product launches hypothesizes that a particular product would be profitable,then launching an unprofitable product is a

When a variable can take on different values

You expect one-third of your customers to be high value,willing to pay $9 for your product,and the other two-thirds to be low value customers willing to pay only $3.You cannot tell them apart.If the product costs $3,and you charge $9,what is your expected profit?