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David is concerned with setting a correct production level.He can produce 500 units or 1100 units.Regardless of production, there is a 45% chance of high
David is concerned with setting a correct production level.He can produce 500 units or 1100 units.Regardless of production, there is a 45% chance of high demand (2000 units) and a 35% chance of low demand (350 units) and a 20% chance of average demand (1000 units).Each unit costs $15 to produce and sells for $25.He can only sell the minimum of either demand or production (since he can't sell what he doesn't make and can't sell what isn't demanded).
- What is theexpected value of profitif you make a decision based on theexpected value of profit?
- What is theexpected value of profitif you make a decision based on themaximax strategy?
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