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A group of Physicians must build an addition to their existing private clinic. They are considering three different sized additions; a small, a medium and

A group of Physicians must build an addition to their existing private clinic. They are considering three different sized additions; a small, a medium and a large addition. If the medical demand is high, they would realize a net profit of $100,000 with a large addition, a net profit of $40,000 with a medium addition and a net profit of $10,000 with a small addition. Ifhe medical demand is low they would realize a net loss of $40,000 with the large addition, a net loss of $10,000 with the medium addition and a net profit of $5,000 with the small addition. The Physicians were also able to assign utility preference values to each of the potential payoffs they could encounter. Utility of $100,000 is 1.0, U ($40,000) is 0.9, U ($10,000) is 0.6, U ($5,000) is 0.5, U ($-10,000) is 0.4, and U ($-40,000) is 0.0. The physicians also have a reliable forecast indicating a 40% probability of the high medical demand. Using expected utility, what alternative should they choose and what is the expected utility of that decision?a.medium, 0.60b.large, 0.40c.small, 0.42d.small, 0,44

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