An Australian company accepts a contract to drill a water well for household use. Its profit will

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An Australian company accepts a contract to drill a water well for household use. Its profit will be AU\$3,500 if the well depth necessary to provide an adequate supply of water is 35 meters, but it will lose AU\$1,600 if the well depth is 80 meters. Given the firm's experience and knowledge of the area, the probability of having to drill to 80 meters is \(30 \%\). What is the most the firm would be willing to pay for a seismic-reflection survey that would determine exactly how deep the company would need to drill the water well?

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Microeconomics

ISBN: 9781292215624

8th Global Edition

Authors: Jeffrey Perloff

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