This decision tree illustrates the expected profits and standard deviations associated with three decisions facing a mobile phone producer. All figures are in millions of dollars. The root node represents the decision of whether to produce the phones in China or North America. The second pair of nodes represents the decision of whether to market the phones in China or North America. The final nodes represent the choice of selling price: if the phones are sold in China, they will be sold for either $30 or $40, whereas if they are sold in North America, they will be sold for either $40 or $50. Based on these calculated values, what is the company's best strategy? - **Make in China:** - **Sell in China:** - $30: Mean = 1,250, SD = 750 - $40: Mean = 375, SD = 625 - **Sell in North America:** - $40: Mean = -1,000, SD = 1,500 - $50: Mean = -1,500, SD = 1,250 - **Make in North America:** - **Sell in China:** - $30: Mean = -1,500, SD = 1,250 - $40: Mean = -250, SD = 1,639 - **Sell in North America:** - $40: Mean = 1,250, SD = 2,137 - $50: Mean = -250, SD = 1,639 This decision tree helps to visualize the potential outcomes and associated risks for each possible production and sales strategy.
This decision tree illustrates the expected profits and standard deviations associated with three decisions facing a mobile phone producer. All figures are in millions of dollars. The root node represents the decision of whether to produce the phones in China or North America. The second pair of nodes represents the decision of whether to market the phones in China or North America. The final nodes represent the choice of selling price: if the phones are sold in China, they will be sold for either $30 or $40, whereas if they are sold in North America, they will be sold for either $40 or $50. Based on these calculated values, what is the company's best strategy? - **Make in China:** - **Sell in China:** - $30: Mean = 1,250, SD = 750 - $40: Mean = 375, SD = 625 - **Sell in North America:** - $40: Mean = -1,000, SD = 1,500 - $50: Mean = -1,500, SD = 1,250 - **Make in North America:** - **Sell in China:** - $30: Mean = -1,500, SD = 1,250 - $40: Mean = -250, SD = 1,639 - **Sell in North America:** - $40: Mean = 1,250, SD = 2,137 - $50: Mean = -250, SD = 1,639 This decision tree helps to visualize the potential outcomes and associated risks for each possible production and sales strategy.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:This decision tree illustrates the expected profits and standard deviations associated with three decisions facing a mobile phone producer. All figures are in millions of dollars. The root node represents the decision of whether to produce the phones in China or North America. The second pair of nodes represents the decision of whether to market the phones in China or North America. The final nodes represent the choice of selling price: if the phones are sold in China, they will be sold for either $30 or $40, whereas if they are sold in North America, they will be sold for either $40 or $50. Based on these calculated values, what is the company's best strategy?
- **Make in China:**
- **Sell in China:**
- $30: Mean = 1,250, SD = 750
- $40: Mean = 375, SD = 625
- **Sell in North America:**
- $40: Mean = -1,000, SD = 1,500
- $50: Mean = -1,500, SD = 1,250
- **Make in North America:**
- **Sell in China:**
- $30: Mean = -1,500, SD = 1,250
- $40: Mean = -250, SD = 1,639
- **Sell in North America:**
- $40: Mean = 1,250, SD = 2,137
- $50: Mean = -250, SD = 1,639
This decision tree helps to visualize the potential outcomes and associated risks for each possible production and sales strategy.
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