The management of Acrosonic is faced with the problem of deciding whether to expand the production of its line of electrostatic loudspeaker systems. It has been estimated that an expansion will result in an annual profit of $200,000 for Acrosonic if the general economic climate is good. On the other hand, an expansion during a period of economic recession will cut its annual profit to $100,000. As an alternative, Acrosonic may hold the production of its electrostatic loudspeaker systems at the current level and expand its line of conventional loudspeaker systems. In this event, the company is expected to make a profit of $40,000 in an expanding economy (because many potential customers will be expected to buy electrostatic loudspeaker systems from other competitors) and a profit of $170,000 in a recessionary economy.
Should management recommend expanding the company's line of electrostatic loudspeaker systems?
Hint: The row player is the management of the company and the column player is the economy.
A) yes
B) no

Question

The management of Acrosonic is faced with the problem of deciding whether to expand the production of its line of electrostatic loudspeaker systems. It has been estimated that an expansion will result in an annual profit of $200,000 for Acrosonic if the general economic climate is good. On the other hand, an expansion during a period of economic recession will cut its annual profit to $100,000. As an alternative, Acrosonic may hold the production of its electrostatic loudspeaker systems at the current level and expand its line of conventional loudspeaker systems. In this event, the company is expected to make a profit of $40,000 in an expanding economy (because many potential customers will be expected to buy electrostatic loudspeaker systems from other competitors) and a profit of $170,000 in a recessionary economy. ​
Should management recommend expanding the company's line of electrostatic loudspeaker systems?​
Hint: The row player is the management of the company and the column player is the economy.
A) yes
B) no

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Quizplus · Accepted Answer

u200bExpanding the electrostatic loudspeaker systems yields a higher minimum profit ($100,000 during recession) compared to the minimum profit of expanding the conventional line ($40,000 in an expanding economy), making it the better strategic choice.

The Management of Acrosonic Is Faced with the Problem of Deciding