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Question 6 Consider the following payoff table that represents the...

Question 6

Consider the following payoff table that represents the profits earned for each alternative (A, B, and C) under the states of nature S1, S2, and S3. 

                  S1        S2        S3

       A        $60      $145    $120       B            $75      $125   $110

       C        $95      $85      $130

 

Refer to the payoff table. Using the maximin criterion, what would be the highest expected payoff?


a.$85


b.$75


c.$145


d.$125


Question 7

Consider the following payoff table that represents the profits earned for each alternative (A, B, and C) under the states of nature S1, S2, and S3. 

                  S1        S2        S3

       A        $60      $145    $120       B            $75      $125   $110

       C        $95      $85      $130

 

Refer to the payoff table. Using the Laplace criterion, what would be the highest expected payoff?


a.$108.30


b.$103.30


c.$125


d.$120


Question 8

Consider the following payoff table that represents the profits earned for each alternative (A, B, and C) under the states of nature S1, S2, and S3. 

                  S1        S2        S3

       A        $60      $145    $120       B            $75      $125   $110

       C        $95      $85      $130

 

Refer to the payoff table. What is the expected value of perfect information (EVPI)? Assume P(S1) = 0.5 and P(S2) = 0.25.



a.$11.25

b.$20


c.$0

d.$15


Question 12

The ABC Corporation is considering introducing a new product, which will require buying new equipment for a monthly payment of $5,000. Each unit produced can be sold for $20.00. ABC incurs a variable cost of $10.00 per unit. Suppose that ABC would like to realize a monthly profit of $50,000. How many units must they sell each month to realize this profit?


a.500 units


b.5000 units

c.4500 units


d.450 units

Answer & Explanation
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