1. Critically assess the view that an understanding of the principles of 'scientific' decision-making is fundamental to the success of a modern economy.

2. (i) Explain the concept of opportunity loss, and show that the minimum opportunity loss is equal to the Expected Value of Perfect Information.

(ii) The failure rate in a particular examination is estimated to be 40%. Construct a table showing the probabilities of 0, 1, 2 . . . 5 students failing in a sample of five.

(iii) 150 graduate entrants are due to take their first professional accounting exam at the Institute of Certifiable Accountants. The probability distribution for the failure rate is estimated in the following table: Failure rate 0.1 0.2 0.3 0.4 0.5 Probability 0.1 0.2 0.3 0.3 0.1 Each failing student is entitled to a 10 refund on professional fees. The Institute's senior tutor is confident that she could ensure a failure rate of 0.1 by holding an intensive revision course, at a cost to the Institute of 300.

Advise the Institute on whether the revision course should take place. A tutorial test of five students resulted in no failures. Use this information to revise the failure rate probability distribution, and hence reassess the revision course.

3. 'Despite being a small local shopkeeper I can always beat the price that Woolworths charge for the same product. Woolworths must pay rent on its store while I own my shop and have no rent to pay.' Discuss.

4. A firm keeps a record of sales and prices over the past seven months, resulting in the following table:

Nov. 1985 Dec. Jan. 1986 Feb. March April May Price (/ton) 7.5 8.0 8.0 7.2 7.0 8.0 8.5 Sales (tons) 84.5 82.0 84.0 92.0 95.0 92.0 91.5 Use these observations to estimate demand as a linear function of both price and time. Utilise this function to estimate demand for the following month, on the assumption that:

(a) price remains unchanged,

(b) price increases to 9/ton.