What is wrong with the manager calculation

Assignment Help Microeconomics

Reference no: EM131523952

Question: A firm is negotiating with a local club to supply materials for a party. The firm's manager expects to sell 100 large bags of pretzels for $3 each or 300 for $2 each; these two outcomes are judged to be equally likely. The expected number of bags sold is 200 = (100 + 300)/2, and expected price is $2:50 = ($3 + $2)/2. The manager then calculates expected revenue as the expected number sold times the expected price: E(Revenue) = 200($2:50) = $500. What is wrong with the manager's calculation?

Reference no: EM131523952

Questions Cloud

The framework for analyzing the moral foundations : Principalism is the framework for analyzing and comparing the moral foundations of the ethical statements of these health-related professional associations.

Employees is a key employee : Which of the following employees is a key employee for 2016?

Regulation of business relationships : Why is the issue of insolvency an important factor in the regulation of business relationships?

Budget without hurting performance : How the organization Cut Its Budget Without Hurting Performance?

What is wrong with the manager calculation : A firm is negotiating with a local club to supply materials for a party. The firm's manager expects to sell 100 large bags of pretzels for $3 each or 300.

Considered highly compensated : Which of the following people is considered highly compensated for 2016?

Marginal cost-cost of debt and cost of preferred stock : Out of these methods Marginal cost ,Cost of Debt, Cost of Preferred Stock, Cost of Equity, CAPM, Risk-free rate, Dividend Valuation Model,

Board of governors of the federal reserve system : Download the H.10 release Foreign Exchange rates (weekly data available). What has happened to the value of the U.S. dollar relative to the Canadian dollar

Cash flow be under the proposed capital structure of firm : What will Allison’s cash flow be under the proposed capital structure of the firm? Assume she keeps all 200 of her shares

User Account

All Pages