Question: A firm is weighing three capacity alternatives: small, medium, and large job shop. Whatever capacity choice is made, the market demand for the firm's product

  • A firm is weighing three capacity alternatives: small, medium, and large job shop. Whatever capacity choice is made, the market demand for the firm's product can be "moderate" or "strong." The probability of moderate market demand is estimated to be 0.4; the probability of strong market demand is estimated to be 0.6. The anticipated profits are as follows:
  • a. Small job shop: moderate market demand = $24,000; strong market demand = $54,000.
  • b. Medium job shop: moderate market demand = $20,000; strong market demand = $64,000.
  • c. Large job shop: moderate market demand = -$2,000; strong market demand = $96,000.
  • Referring to Scenario above, the expected monetary value (EMV) for the Large job shop decision is:

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