Homework Week 7
17.1 Global Expansion:
Malaysia = (0.3*1,200,000) + (0.3*600,000) + (0.4*0) = 360,000 + 180,000 = $540,000
Philippines = (0.3*1,000,000) + (0.5*320,000) + (0.2*0) = 300,000 + 160,000 = $460,000
Singapore = (0.7*700,000) + (0.2*400,000) + (0.1*0) = 490,000 + 80,000 = $570,000

You should enter Singapore’s market due to their highest expected sales compared to Malaysia and the Philippines.

Total Revenue = 10*570,000 = $5,700,000
Total Cost = 250,000 + (8*570,000) = 250,000 + 4,560,000 = $4,810,000
Expected profit = 5,700,000 – 4,810,000 = $890,000

17.2 Game Show Uncertainty:
E = (2,000,000*.50) + (500,000*.50) = $1,250,000

If the person doesn’t play, he goes back with $1,000,000. Since the expected earning is more if he continues to play, he should make an attempt to guess since he’s got a 50% chance of doubling his winnings.

19.3 Bicycle Insurance and Information Asymmetry:
Yes, there will be an adverse selection problem. Depending on the theft rate of the area that the consumer lives in, the individual selling the bicycle theft insurance should be able to determine whether or not a high- or low-risk rate should be charged.

20.3 Locator Beacons for Lost Hikers:
With the locator beacons being made available to hikers, this would definitely cut costs that the Forest Service incurs in terms of overhead and gas resources needed to locate lost