A Firm Is Making Production Plans for Next Quarter,but the Manager

Multiple Choice

A firm is making production plans for next quarter,but the manager does not know what the price of the product will be next month.She believes there is a 30 percent chance price will be $500 and a 70 percent chance price will be $750.The four possible profit outcomes are: $$\begin{array} { l c c } & \text { Profit (loss) when price is: } \\& \$ 500 & \$ 750 \\\hline \text { Oplian A produce } 1,000 \text { unids } & -\$ 12,000 & \$ 80,000 \\\text { Option } 8 \text { produce } 2,000 \text { unids }& -\$ 20,000 & \$ 150,000\end{array}$$ Which option has the highest (absolute) risk?

A) Option A is riskier than Option B.
B) Option B is riskier than Option A.
C) Both options have the level of risk if the manager is risk averse.
D) cannot calculate risk with the given information