If Firm A charges a high price for its product, the probability that a competitor will respond with a high price is 0.7. If the probability of an economy going to recession next year is 0.3, what is the probability of the competitor charging a high price and a recession starting next year if Firm A charges a high price?
A) 0.21
B) 0.3
C) 0.4
D) 0.7

Question

Quizplus · Accepted Answer

The probability of both events happening is found by multiplying the probabilities of each event: 0.7 (competitor charging a high price) * 0.3 (recession starting) = 0.21.

If Firm a Charges a High Price for Its Product