A Firm Making Production Plans Believes There Is a 30

Multiple Choice

A firm making production plans believes there is a 30% probability the price will be $10,a 50% probability the price will be $15,and a 20% probability the price will be $20.The manager must decide whether to produce 6,000 units of output (A) ,8,000 units (B) or 10,000 units (C) .The following table shows 9 possible outcomes depending on the output chosen and the actual price. $$\begin{array} { c c c c } & { \text { Prand (Lasi) when price is } } \\\text { Pradiction } & \$ 10 & \$ 15 & \$ 20 \\\hline 6,000 ( A ) & - \$ 200 & \$ 400 & \$ 1,000 \\\text { B,000 } ( B ) & - \$ 400 & \$ 600 & \$ 1,600 \\10,000 ( C ) & - \$ 1,000 & \$ 800 & \$ 3,000\end{array}$$ If the mean-variance rule is used,how much should the firm produce?

A) 6,000
B) 8,000
C) 10,000
D) cannot use this rule to make the decision