Author Question: A market maker faces the following demand and supply for widgets. Eleven buyers are willing to buy ... (Read 24 times)

jCorn1234 · **on:** Jul 1, 2018

A market maker faces the following demand and supply for widgets. Eleven buyers are willing to buy at the following prices: 15, 14, 13, 12, 11, 10, 9, 8, 7, 6, 5 . Eleven sellers are also willing to sell at the same prices. If the market maker is free to choose the number of transactions he can make, what is his maximum profit?
a. 8
b. 10
c. 18
d. 28

Question 2

Transcendent Alternatives Transcendent Technologies is deciding between developing complicated, thought-activated software, or simple, voice-activated software. The voice-activated software would cost 50 million to develop and has a 60 chance of being successfully launched and generating revenue of 100 million. The thought-activated software would be a bonanza if successful, generating 1 billion in revenue. But it is so complicated, it is projected to cost would be 400 million. How likely would success have to be for Transcendent Technologies to opt for the thought-activated software?

stano32 · **Reply #1 on:** Jul 1, 2018

Answer to Question 1

c

Answer to Question 2

Expected profits from the voice-activated software are 0.6(100 million) - 50 million = 10 million. If successful, profits from the thought-activated software would be 1 billion(X) - 400 million >= 10M. So the required probability of success would have to be 410 million / 1000 million = 0.41 or higher in order for the expected profits from the thought-activated software to exceed the alternative.