1) Assume that the monopolist is risk neutral, what is the expected payoff from developing the new technology, EP * (NT) = 1.5 2.0 4.0 6.02)Assume that the monopolist is risk neutral, which statement is true? A)The monopolist chooses to develop the new technology. B)The monopolist chooses not to develop the new technology . C)The monopolist is indifferent between developing or not developing the new technology D)From the given information, it is not possible to say whether the monopolist chooses to develop or not to develop the new technology .3. Assume that the monopolist is risk averse with utility function U = 59r (Payoff), what is the expected utility from developing the new technology, EU(NT 1.5 2.0 4.0 6.04. Assume that the monopolist is risk averse, which statement would be true? The monopolist chooses to develop the new technology. The monopolist chooses not to develop the new technology. The monopolist is indifferent between developing or not developing the new technology From the given information, it is not possible to say whether the monopolist chooses to develop or not to develop the new technology.

Decision Analysis - Old vs. New Technology The next 20 questions refer to the following scenario: Consider a monopolist selling a product with inverse demand of Pp=12-Q. The firm currently has production costs of C(q)-5+6Q. The firm has the option of attempting to develop a new technology that would lower production costs to C(q)=5+2Q. Research and development costs are $4 if undertaken and must be incurred regardless of whether or not the new technology is "successful" or a "failure." This means that in case of failure, the firm still needs to produce with C(q)=5+6Q but incurs $4 in sunk costs. If the firm attempts to develop the new technology, the innovation will be successful with probability p=3/8. Throughout your analysis, restrict attention to the profit/loss of the firm in only the current period (i.e., assume that the firm will not be operating in any future period)