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Risk and Uncertainty Question Ann Brown has a plant capacity of 1,200 units per month. Units cost her $6 each to make. She sells them
Risk and Uncertainty Question Ann Brown has a plant capacity of 1,200 units per month. Units cost her $6 each to make. She sells them at $11 each. However, the demand per month is uncertain and is as follows: She has been approached by a customer who is willing to contract to a fixed quantity per month at a price of $9 per unit. The customer is prepared to sign a contract to purchase 300,500,700, or 800 units per month. Production levels can vary up to the maximum capacity; however, the company cannot produce more than it can sell. Required: 1. Calculate all possible profits that could result. 2. Determine for what quantity Ann should sign a contract assuming she is: a. Risk neutral b. Risk avoider c. Risk seeker
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