Exam 14: Managerial Decision-Making Under Uncertainty

Sarah buys little stuffed animals for $5 each. They come in different varieties. If the producer stops making (retires)a certain variety, a stuffed animal of that variety will be worth $100; otherwise it is worth $0. There is 25% chance that any variety will be retired. For the purchase of an individual animal, what is the value to Sarah of knowing ahead of time whether or not that variety will be retired?

If Stock A increases in value when Stock B decreases in value at the same time, they are

A(n)________ relates each possible outcome to its probability of occurrence.

On any given day, a salesman can earn $0 with a 30% probability, $100 with a 20% probability, or $300 with a 50% probability. His expected earnings equal

John derives more utility from having $1,000 than from having $100. From this, we can conclude that John

If you have flipped a fair coin and tails has come up 49 times in a row, what are the odds that the next flip will be a tail?

A stock mutual fund is generally

If two events are perfectly positively correlated, then

If Stock A sometimes increases and sometimes decreases in value when Stock B increases in value at the same time, they are

Making many risky bets

If there are 10,000 people in your age bracket, and 10 of them died last year, an insurance company believes that the probability of someone in that age bracket dying this year would be

A stock mutual fund's primary advantage is to allow

Taking actions that reduce risk

If an event is certain to occur, it has a probability (pr)of

People in a certain group have a 0.3% chance of dying this year. If a person in this group buys a life insurance policy for $3,300 that pays $1,000,000 to her family if she dies this year and $0 otherwise, what is the expected value of a policy to the insurance company?

Searching the Internet for information to help select a product that is more reliable is most likely to be done by a

Many people do NOT fully insure against risk because

What is one reason the federal government might "bail out" farmers in flood prone areas of the country?

A person who is risk-neutral will

Insurance companies do NOT cover losses that would