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A small building contractor has recently experienced two successive years in which work opportunities exceeded the firm s capacity. The contractor must now make a

A small building contractor has recently experienced two successive years in which work opportunities exceeded the firms capacity. The contractor must now make a decision on capacity for next year. Estimated profits under each of the two possible states of nature are as shown in the table below. Suppose after a certain amount of discussion, the contractor is able to subjectively assess the probabilities of low and high demand: P (low)=.3 and P (high)=.7.

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