A manufacturer produces 1000 computer chips for a mission-critical application. Each chip costs $100 to manufacture and sells for $3000, but has a 2% chance of being defective.

1)

Compute the mean and standard deviation of the number of defective chips.

2)

Assume that 99% of defective chips are discovered (and destroyed) before they are sold, while the other 1% are sold with defects. The manufacturer suffers an estimated loss of $5,000,000 for each defective chip sold (due to lawsuits, penalties, and bad public relations). What is the manufacturer's expected profit?

3)

The manufacturer develops a new quality control technology which enables detection of 100% of defective chips. How much would the implementation of this technology increase the manufacturer's expected profit?