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ABC Company, a soft-drink vendor, has created a table of payoffs for three stocking decisions for three different states of nature:
States of nature (Demand)
Alternatives Heavy Medium Low
Large stock $2,060 $1,510 $1,200
Average stock $1,390 $1,430 $1,290
Small stock $1,560 $1,550 $1,890
Probabilities associated with the states of nature are 0.4 for heavy demand, 0.2 for medium demand, and 0.4 for low demand. What is the expected value with perfect information? Specify only the amount. e.g. 14000
Explain how probability is used in that situation.
A chemical firm produces sodium bisulfate in 100-pound bags. Demand for this product is 20 tons per day. The capacity for producing the product is 50 tons per day. Setup costs $100
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