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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 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).

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Expected value of profit = ( Price - Cost ) ( Expected quantity ) =... View the full answer

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