Economics

17.2)

In the final round of a TV game show, contestants

have a chance to increase their current winnings of

$1 million to $2 million. If they are wrong, their

prize is decreased to $500,000. A contestant thinks

his guess will be right 50% of the time. Should he

play? What is the lowest probability of a correct

guess that would make playing profitable?

17.6)

The HR department is trying to fill a vacant

position for a job with a small talent pool. Valid

applications arrive every week or so, and the

applicants all seem to bring different levels of

expertise. For each applicant, the HR manager

gathers information by trying to verify various

claims on resumes, but some doubt about fit

always lingers when a decision to hire or not is

to be made. What are the Type I and II decision

error costs? Which decision error is more likely to

be discovered by the CEO? How does this affect

the HR manager’s hiring decisions?

17-1

Describe a decision your company has made

when facing uncertainty. Compute the expected

costs and benefits of the decision. Offer advice

on how to proceed. Compute the profit consequences

of the advice. In 500-700 words address the following questions

1. What environmental factors and risks must be considered in the company's decision-making process?

2. Evaluate costs factors influencing the company's decision.

3. Determine strategies that would provide value to the outcome your company is seeking relating to this decision.