Consider a chocolate manufacturing company that can produces two types of chocolate – A and B. Both the chocolates require Milk and Choco only. To manufacture each unit of A and B, the following quantities are required: • Each unit of A requires 1 unit of Milk and 2 units of Choco • Each unit of B requires 2 unit of Milk and 1 units of Choco Currently, the milk price is 1$/unit and the choco price is 1$/unit. We can sell chocolate A for 10$ and Chocolate B for 8$. Assume we are planning for the next two years. The milk prices may go up 20% by probability of 40% and may go down 10% by probability of 60%. The choco prices may go up 30% by probability of 50% and may go down 20% by probability of 50%. The current demand for A is 1000 units per year. The demand is assumed to stay fix. We have limited budget. Lets calculate the profit we may get from producing any of these chocolates to decide about best option for the next two years (decide about to produce A or B?). The discount rate is k=0.1. Hint: assume we have period 0, 1, 2

The new york times (nov. 30, 1993) reported that “the inability of opec to agree last week to cut production has sent the oil market into turmoil . . [leading to] the lowest price for domestic crude oil since june 1990.” why were the members of opec trying to agree to cut production? so they could save more oil for future consumption so they could lower the price so they could raise the price why do you suppose opec was unable to agree on cutting production? because each country has a different production capacity because each country experiences different production costs because each country has an incentive to cheat on any agreement the newspaper also noted opec’s view “that producing nations outside the organization, like norway and britain, should do their share and cut production.” what does the phrase “do their share” suggest about opec’s desired relationship with norway and britain? opec would like norway and britain to keep their production levels high. opec would like norway and britain to act competitively. opec would like norway and britain to join the cartel.