A plant manager wants to know how much she should be willing to pay for perfect market research. Currently there are two states of nature facing her decision to expand or do nothing. Under favorable market conditions the manager would make $100,000 for the large plant and $60,000 for the small plant. Under unfavorable market conditions the large plant would lose $70,000 and the small plant would make $0. Probability for favorable market is 0.6, how much should she pay for perfect information? $60,000 $100,000 $24,000 $36,000 A retailer is deciding how many units of a certain product to stock. The historical probability distribution of sales for this product is O units, 0.2; 1 unit, 0.3; 2 units, 0.4, and 3 units, 0.1. The product costs $11 per unit and sells for $25 per unit. What is the conditional value for the decision alternative "Stock 3 units" and state of nature "Sell 1 unit"? $1 profit $5 profit -$5 profit $15 profit

Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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A plant manager wants to know how much she should be willing to pay for
perfect market research. Currently there are two states of nature facing her
decision to expand or do nothing. Under favorable market conditions the
manager would make $100,000 for the large plant and $60,000 for the small
plant. Under unfavorable market conditions the large plant would lose
$70,000 and the small plant would make $0. Probability for favorable
market is 0.6, how much should she pay for perfect information?
$60,000
$100,000
$24,000
$36,000
Transcribed Image Text:A plant manager wants to know how much she should be willing to pay for perfect market research. Currently there are two states of nature facing her decision to expand or do nothing. Under favorable market conditions the manager would make $100,000 for the large plant and $60,000 for the small plant. Under unfavorable market conditions the large plant would lose $70,000 and the small plant would make $0. Probability for favorable market is 0.6, how much should she pay for perfect information? $60,000 $100,000 $24,000 $36,000
A retailer is deciding how many units of a certain product to stock. The
historical probability distribution of sales for this product is O units, 0.2; 1
unit, 0.3; 2 units, 0.4, and 3 units, 0.1. The product costs $11 per unit and
sells for $25 per unit. What is the conditional value for the decision
alternative "Stock 3 units" and state of nature "Sell 1 unit"?
$1 profit
$5 profit
-$5 profit
$15 profit
Transcribed Image Text:A retailer is deciding how many units of a certain product to stock. The historical probability distribution of sales for this product is O units, 0.2; 1 unit, 0.3; 2 units, 0.4, and 3 units, 0.1. The product costs $11 per unit and sells for $25 per unit. What is the conditional value for the decision alternative "Stock 3 units" and state of nature "Sell 1 unit"? $1 profit $5 profit -$5 profit $15 profit
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