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Managerial Economics · End Term · 10 May 2026 · January 2026 term · Set 1-2

Question 20: Choose the correct alternative(s)

Question 20

+2 marksOne or more correct options

Consider two investment opportunities in new products: gourmet marmite and gourmet honey. People might either really like or really dislike the gourmet marmite, so it generates a payoff of $0.5 with 30 percent probability, a payoff of $1 million with 40 percent probability and a payoff of $1.5 million with 30 percent probability. The gourmet honey is less likely to either really turn people off or really turn them on, so it has a payoff of $0.5 million with 20 percent probability, $1 million with 60 percent probability and $1.5 million with 20 percent probability.
Based on the above data, answer the given subquestions.

Choose the correct alternative(s)

Select all that apply.

  1. A

    The second product is riskier than the first product

  2. B

    Second product has lower variance than the first product

  3. C

    First product has a lower variance than the second product

  4. D

    The first product is riskier than the second product

Show answer

Correct answers

  • B

    Second product has lower variance than the first product

  • D

    The first product is riskier than the second product

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Question 20 of 36 in the IIT Madras BS Managerial Economics (Managerial Economics) End Term paper sat on 10 May 2026, in the January 2026 term (Managerial Economics 06 May 26). It carries 2 marks.

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