Leisure Corporations decision to produce a new line of recreational products resulted in the need to construct either a small plant or a large plant. The best plant size depends on how the marketplace reacts to the new product line. To conduct an analysis, marketing management has decided to view the possible long-run demand as low, medium, or high. The following payoff table shows the projected profit in millions of dollars. Assume that the probability of low demand is 0.2, the probability for medium demand is 0.5, and the probability for high demand is 0.3

1. If Leisure Corporation has an extremely pessimistic outlook on demand, would it build a small or a large plant?
2. If Leisure Corporation wanted to minimize the maximum opportunity losses (regrets), would it build a small or a large plant?
3. If Leisure Corporation wanted to maximize expected profits, would it build a large or a small plant?
4. What is the maximum amount of money that Leisure Corporation should be willing to spend to get more information about the long-run demand?

\begin{tabular}{|l|c|c|c|} \hline Profits & \multicolumn{3}{|c|}{ Long-Run Demand } \\ \hline & Low & Medium & High \\ \hline Small Plant & 150 & 200 & 200 \\ \hline Large Plant & 50 & 200 & 500 \\ \hline \end{tabular} \begin{tabular}{|l|c|c|c|} \hline Profits & \multicolumn{3}{|c|}{ Long-Run Demand } \\ \hline & Low & Medium & High \\ \hline Small Plant & 150 & 200 & 200 \\ \hline Large Plant & 50 & 200 & 500 \\ \hline \end{tabular}