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Refer to Exercise 3.56. Suppose the firm has a fixed cost
Chapter 3, Problem 57E(choose chapter or problem)
Refer to Exercise 3.56. Suppose the firm has a fixed cost of $20,000 in preparing equipment prior to doing its first exploration. If each successful exploration costs $30,000 and each unsuccessful exploration costs $15,000, find the expected total cost to the firm for its ten explorations.
Questions & Answers
QUESTION:
Refer to Exercise 3.56. Suppose the firm has a fixed cost of $20,000 in preparing equipment prior to doing its first exploration. If each successful exploration costs $30,000 and each unsuccessful exploration costs $15,000, find the expected total cost to the firm for its ten explorations.
ANSWER:
Solution:
Step 1 of 2:
Given that, each successful exploration costs is $30,000 and each unsuccessful exploration costs is $15,000. The firm has fixed a cost of $20,000.
Here we have to find the expected total cost to the firm for its ten explorations.