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Managerial Economics · End Term · 31 Aug 2025 · May 2025 term · Set QIA1

Question 11: For which values of p will you decide to get an MBA?

Question 11

+2 marksOne correct option

Imagine that you have been working after college and now face the decision of whether or not to get an MBA at a prestigious institution. The cost of getting the MBA is 10. (Again, you can decide on the denomination, but rest assured that this sum includes the income lost over the course of the two years you will be studying!) Your future value is your stream of income, which depends on the strength of the labor market for the next decade. If the labor market is strong then your income value from having an MBA is 32, while your income value from your current status is 12. If the labor market is average then your income value from having an MBA is 16, while your income value from your current status is 8. If the labor market is weak then your income value from having an MBA is 12, while your income value from your current status is 4. Further assume that the probability of a strong labor market is p, of an average labor market is 0.5 and of a weak labor market is 0.5− p.
Based on the above data, answer the given subquestions.

For which values of p will you decide to get an MBA?

  1. A
  2. B
  3. C
  4. D
Show answer

Correct answer

  • B
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Question 11 of 37 in the IIT Madras BS Managerial Economics (Managerial Economics) End Term paper sat on 31 Aug 2025, in the May 2025 term (IIT M IMPROVEMENT FN EXAM QIA1 31 Aug 2025). It carries 2 marks.

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