Laid-off workers who become entrepreneurs because they cannot find meaningful em
ID: 3040662 • Letter: L
Question
Laid-off workers who become entrepreneurs because they cannot find meaningful employment with another company are known as entrepreneurs by necessity. A major national newspaper reports that these entrepreneurs by necessity are less likely to grow into large business than are entrepreneurs by choice. This article states that 76 %76% of entrepreneurs in a certain area are entrepreneurs by choice and 24 %24% are entrepreneurs by necessity. Only 4 %4% of entrepreneurs by necessity expect their new business to employ 20 or more people within five years, whereas 16 %16% of entrepreneurs by choice expect to employ at least 20 people within five years. If an entrepreneur is selected at random and that individual expects that his or her new business will employ 20 or more people within five years, what is the probability that this individual is an entrepreneur by choice?
Explanation / Answer
probability of business will employ 20 or more people within five years
=P(entrepreneurs by choice and employ 20 or more people+ entrepreneurs by necessity and employ 20 or more people) =0.76*0.16+0.24*0.04=0.1312
hence probability that this individual is an entrepreneur by choice given individual expects that his or her new business will employ 20 or more people
=P(entrepreneurs by choice and employ 20 or more people)/P(employ 20 or more people )
==0.76*0.16/0.1312=0.926829
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