Managerial Economics

Read the followin" rel="nofollow">ing fictional scenario and write a report that addresses the questions shown below:The managin" rel="nofollow">ing director of a Belgian outdoor caterin" rel="nofollow">ing company has to decide whether or not to lease new capital equipment. She knows that the demand for their services will depend on the situation in" rel="nofollow">in the macroeconomy in" rel="nofollow">in Belgium. The possible outcomes are summarised in" rel="nofollow">in this contin" rel="nofollow">ingency table: Demand Conditions Probability Leasin" rel="nofollow">ing No leasin" rel="nofollow">ing Profit Utility Profit Utility Above normal 0.25 80 92 60 76 Normal 0.50 50 40 34 60 Below normal 0.25 0 0 20 20 Profits are measured in" rel="nofollow">in 000s of € and Utility is measured in" rel="nofollow">in 000s of Utils. 1. Explain" rel="nofollow">in what is meant by the term ‘expected profit’. What would the expected profit from each decision? 2. Explain" rel="nofollow">in what is meant by the term ‘expected utility’. What would be the expected utility from each decision? 3. How would the decision whether to lease new equipment be in" rel="nofollow">influenced by the managin" rel="nofollow">ing director’s attitude towards risk? 4. What methods are available to the managin" rel="nofollow">ing director to reduce the risk in" rel="nofollow">involved in" rel="nofollow">in this decision?