Answer:
(a) Given that a chip passes the test, what is the probability that it is a good chip?
LetB = {the chip is good}
A={the chip passes the cheap test}.
Bc={the chip is bad}
Ac={the chip fails the cheap test}
P(A | B) = 1
P(A | B
c
) = 0.075
= 
= 
≈ 0.9751
(b) If the company sells all chips that pass the cheaper test, what percentage of sold chips will be bad?
P(B
c |A) = 1 − P(B | A) = 1 - 0.9751 = 0.0249
Answer:
The business judgement rule states that if the board takes decision in good faith and in best interest of the corporation considering the information available then its decision is not to be questioned by the courts. The courts can intervene only if there is any breach of good faith, due care or loyalty.
The above case is similar in facts with another case paramount vs time. In that case Time decided to merge with another company named Warner. Paramount also started bidding for Time but the directors of Time rejected their bid offer citing that warner merger would be more suitable for the company strategy.
Paramount then brought the case against Time in court.The court stated that the instant case was different from another case (REVLON VS MacAndrews) where Revlon was up for sale and hence it was necessary for the board to sell its assets to the highest bidder.
Answer:
d. Continue production in the short run, but exit the business in the long run unless prices are expected to rise or costs to fall..
Explanation:
Currently, their sales revenue less variable cost is positive as it can sale at $1.50 dollars and the variables cost are less than that. Therefore, there are fixed cost thefirm can pay because it produce.
Now, in the long-run when the firm can exit the market it should consider to do so if it continues to get an average cost above the selling price.
