A pharmaceutical company has determined that if a new cholesterol-reducing drug is manufactured and introduced to the market, the following probability distribution will describe the contribution of this drug to their profits during the next six months. The company management has decided to market this product if the expected contribution to profit for the next six months is more than $1,000,000. Based on the information given above, should the company begin manufacturing the new drug? Explain your answer.
A) Yes, begin manufacturing.
B) No, do not begin manufacturing.

Question

A pharmaceutical company has determined that if a new cholesterol-reducing drug is manufactured and introduced to the market, the following probability distribution will describe the contribution of this drug to their profits during the next six months.  The company management has decided to market this product if the expected contribution to profit for the next six months is more than $1,000,000. Based on the information given above, should the company begin manufacturing the new drug? Explain your answer.
A) Yes, begin manufacturing. 
B) No, do not begin manufacturing.

Quizplus · Accepted Answer

μ_x = .2(−$3,000,000) + .5($5,000,000) + .3($2,000,000) = $2,500,000 $2,500,000 > $1,000,000

A Pharmaceutical Company Has Determined That If a New Cholesterol-Reducing