Question

A small entrepreneurial company is trying to decide between developing two different products that they believe they can sell to two potential companies, one large and one small. If they develop Product A, they have a 50% chance of selling it to the large company with annual purchases of about 20,000 units. If the large company won't purchase it, then they think they have an 80% chance of placing it with a smaller company, with sales of 15,000 units. On the other hand if they develop Product B, they feel they have a 40% chance of selling it to the large company, resulting in annual sales of about 17,000 units. If the large company doesn't buy it, they have a 50% chance of selling it to the small company with sales of 20,000 units.

1-What is the probability that Product B will being purchased by the smaller company?

A. 0.5
B. 0.4
C. 0.3
D. 0.8

Answer 1

The probability that Product B will be purchased by the smaller company is 30%, which corresponds to answer choice C.

Step-by-step explanation:

The probability that Product B will be purchased by the smaller company is calculated by considering that Product B will only be offered to the smaller company if the large company does not purchase it. So, first, we must calculate the probability that the large company does not purchase Product B, which is 1 - 0.4 (since there is a 40% chance that the large company will purchase it). This results in a 60% chance that the large company will not purchase Product B. The probability that Product B will then be purchased by the smaller company is 50% of that 60%, which is calculated as 0.6 × 0.5 = 0.3 or 30%.

Answer 2

The correct option is C) 0.3

Step-by-step explanation:

Consider the provided information.

A small entrepreneurial can develop two product, product A and product B.

If they develop Product A:

There are 50% chance of selling it to the large company with annual purchases of about 20,000 units.

If the large company won't purchase it, then they think they have an 80% chance of placing it with a smaller company, with sales of 15,000 units.

If they develop Product B.

They have a 40% chance of selling it to the large company, resulting in annual sales of about 17,000 units. If the large company doesn't buy it, they have a 50% chance of selling it to the small company with sales of 20,000 units.

If they develop product B than the probability of purchasing by small company is 60% or 0.6

If large company doesn't buy it, then they have 50%or 0.5 chance of selling it to small company.

Hence, the total probability is:
`0.6*0.5=0.3`

Therefore, the correct option is C) 0.3