A pharmaceutical company has determined that if a new cholesterol-reducing drug is manufactured (introduced to the market),the following probability distribution will describe this drug's contribution to the company's profits during the next six months. $\begin{array} { c c }
\text { Profit Contribution } & \text { Probability of Profit Contribution } \
\hline - \$ 30,000 & .20 \
\$ 50,000 & .50 \
\$ 200,000 & .30
\end{array}$
The company management has decided to market this product if the expected contribution to profit for the next six months is more than $90,000.Based on the information given above,should the company begin manufacturing the new drug? Explain your answer.
A)Yes,begin manufacturing.
B)No,don't begin manufacturing.
$\mu _ { x }$

Question

A pharmaceutical company has determined that if a new cholesterol-reducing drug is manufactured (introduced to the market),the following probability distribution will describe this drug's contribution to the company's profits during the next six months. $\begin{array} { c c } 
\text { Profit Contribution } & \text { Probability of Profit Contribution } \
\hline - \$ 30,000 & .20 \
\$ 50,000 & .50 \
\$ 200,000 & .30
\end{array}$
The company management has decided to market this product if the expected contribution to profit for the next six months is more than $90,000.Based on the information given above,should the company begin manufacturing the new drug? Explain your answer.
A)Yes,begin manufacturing.
B)No,don't begin manufacturing.
$\mu _ { x }$

Quizplus · Accepted Answer

The expected profit contribution is calculated as: (-$30,000 * 0.20) + ($50,000 * 0.50) + ($200,000 * 0.30) = -$6,000 + $25,000 + $60,000 = $79,000. Since $79,000 is less than $90,000, the company should not begin manufacturing.

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