Problem 1. A famous economist, Franc Knight, coined a definition regarding the distinction between "risk" and "uncertainty": He defines risk as a situation where we know the possible outcome of a particular course of action and we also know the probabilities of different outcomes (think of an example). Uncertainty is defined as a situation where we don't know exactly all the possible outcomes of a particular course of action, not the probabilities of each outcome.
What do you think is the typical situation in the business world: risk or uncertainty?
Can you think of situations in the business world or other real life situations where you would need to estimate probabilities?
Problem 2. From a business perspective, which measurement is more important the Mode, the Mean, or the Median? Provide examples (business related) that demonstrate the appropriateness of one of these measures and the inappropriateness of the other two in a particular situation.
Can you think of situations where another one of the measures is more appropriate or relevant?