ECP 5705 ECP5705 Week 6 Individual Work 2 (Everest University)

ECP 5705 Week 6 Individual Work 2 (Everest University)

When a company’s activities affect people who do not utilize its products or gain wealth from the company, the company is generating externalities. Does a company have a responsibility to those who do not have a vested interest in the company’s profitability or products?

For this assignment, refer to the concepts from Chapter 11.

In Managerial Economics, read the case “The Black Swan” starting on page 372.

Answer Questions 1-5 on page 373.

1.  What is a Black Swan event?

2.  Does it ever make sense a priori to devote resources to preventing a black swan event? Explain.

3.  Does it ever make sense a priori to devote resources to containing a black swan event should one occur? Explain.

4.  Is human error different than a Black Swan event? Can human error lead to a Black Swan event?

5.  If you were BP’s executive and you were looking at the cost of a blowout loss of 87 percent market value, possible bankruptcy, and so on, and you were determining whether to spend several million dollars providing redundancies—relief wells drilled at the same time as the main well—how would you decide whether to spend the money?