Southland Corporation's decision produce a new line of recreational products has resulted in the need to choose one of two automated manufacturing systems based on proposals from two vendors, A and B. Theeconomics of this decision depends on the market reaction to the new product line. The possible long-run demand has been defined as low, medium, or high. Based on detailed financial analyses of system costs as afunction f volume and sales under each demand scenario, the following payoff table gives the projected profits in millions of dollars.Long-Run DemandDecisionVendor AVendor Ba. Determine the best decisions using the maximax, maximin, and opportunity loss decision criteria.Using the maximax criterion, choose -Select-Using the maximin criterion, choose -Select-To minimize the maximum opportunity loss, choose -Select-b. Assume that the best estimate of the probability of low long-run demand is 0.25, of medium long-run demand is 0.20, and of high long-run demand is 0.55. What the best decision using the expected value criterion?Round your answers to two decimal places.The expected payoff for Vendor A is $The expected payoff for Vendor B is $Choose -Select-million.Lowmillion.Medium$130$130$60$280High$480$130

A scenario with a range of potential outcomes and a range of potential solutions can be effectively…

nomics of this decision depends on the market reaction to the new product line. The possible long-run demand has been defined as low, medium, or high. Based on detailed financial analyses of system costs as a tion of volume and sales under each demand scenario, the following payoff table gives the projected profits in millions of dollars. Long-Run Demand Decision Vendor A Vendor B Determine the best decisions using the maximax, maximin, and opportunity loss decision criteria. Using the maximax criterion, choose -Select- Using the maximin criterion, choose -Select- # To minimize the maximum opportunity loss, choose -Select- Low $60 $280 million. million. Medium $130 $130 High $480 $130 Assume that the best estimate of the probability of low long-run demand is 0.25, of medium long-run demand is 0.20, and of high long-run demand is 0.55. What is the best decision using the expected value criterion? Round your answers to two decimal places. The expected payoff for Vendor A is $ The expected payoff for Vendor B is $ Choose -Select- #].

nomics of this decision depends on the market reaction to the new product line. The possible long-run demand has been defined as low, medium, or high. Based on detailed financial analyses of system costs as a tion of volume and sales under each demand scenario, the following payoff table gives the projected profits in millions of dollars. Long-Run Demand Decision Vendor A Vendor B Determine the best decisions using the maximax, maximin, and opportunity loss decision criteria. Using the maximax criterion, choose -Select- Using the maximin criterion, choose -Select- # To minimize the maximum opportunity loss, choose -Select- Low $60 $280 million. million. Medium $130 $130 High $480 $130 Assume that the best estimate of the probability of low long-run demand is 0.25, of medium long-run demand is 0.20, and of high long-run demand is 0.55. What is the best decision using the expected value criterion? Round your answers to two decimal places. The expected payoff for Vendor A is $ The expected payoff for Vendor B is $ Choose -Select- #].

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Southland Corporation's decision produce a new line of recreational products has resulted in the need to choose one of two automated manufacturing systems based on proposals from two vendors, A and B. The
economics of this decision depends on the market reaction to the new product line. The possible long-run demand has been defined as low, medium, or high. Based on detailed financial analyses of system costs as a
function f volume and sales under each demand scenario, the following payoff table gives the projected profits in millions of dollars.
Long-Run Demand
Decision
Vendor A
Vendor B
a. Determine the best decisions using the maximax, maximin, and opportunity loss decision criteria.
Using the maximax criterion, choose -Select-
Using the maximin criterion, choose -Select-
To minimize the maximum opportunity loss, choose -Select-
b. Assume that the best estimate of the probability of low long-run demand is 0.25, of medium long-run demand is 0.20, and of high long-run demand is 0.55. What the best decision using the expected value criterion?
Round your answers to two decimal places.
The expected payoff for Vendor A is $
The expected payoff for Vendor B is $
Choose -Select-
million.
Low
million.
Medium
$130
$130
$60
$280
High
$480
$130

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