# eco402 midterm solved papers by moaaz

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Creation. Choice with actuality in all fairness sincere. How will we select whilst certain variables
Such as earnings and fees are unsure (i.E. Making alternatives with risk)? Describing hazard. To measure threat we should recognize:

1) all the possible consequences. 2) the probability that each final results will occur (its opportunity).
Deciphering possibility Opportunity is the likelihood that a given outcome will arise. Objective interpretation of Chance is based totally on the found frequency of past events while subjective
Interpretation is based on notion or enjoy with or without an found frequency.

Distinctive statistics or unique abilities to technique the equal information can impact the Subjective probability. Anticipated cost. The predicted fee is the weighted average of the payoffs or values resulting from all possible Effects.

The chances of each outcome are used as weights. Anticipated value measures. The principal tendency; the payoff or value predicted on common. If the firm divides their time calmly among appliances their air con and heating income Could be half their unique values.

If it have been warm, their predicted income could be \$15,000 from. Air conditioners and \$6,000 from heaters, or \$21,000. If it were cold, their predicted earnings. Could be \$6,000 from air conditioners and \$15,000 from heaters, or \$21,000. With Diversification, predicted profits is \$21,000 and not using a hazard. Companies can reduce hazard with the aid of diversifying.

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