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Homework answers / question archive / 1)For the following problems, calculate: Scenario:  The economy is bad and a weak demand is likely

1)For the following problems, calculate: Scenario:  The economy is bad and a weak demand is likely

Math

1)For the following problems, calculate:

  1. Scenario:  The economy is bad and a weak demand is likely.  Think about, even in this situation, when a large complex should still be built.

p(s1) = 0.3            p(s2) = 0.7

 

s1

s2

EV

d1

11

10

10.3

d2

14

6

8.4

P(x)

0.3

0.7

 

 

 

  1. Scenario:  We are unable to get a prediction of the demand, so we go with 50/50.  Think about how close EV(d1) is to EV(d2) and how this influences the problem.

 

P(s1) = 0.5          p(s2) = 0.5

 

s1

s2

EV

d1

5

-1

2

d2

14

-8

3

P(x)

0.5

0.5

 

 

  1. Scenario: We are unable to get a prediction of demand, so we go with 50/50.  Think about the high risk involved with d2.

 

P(s1) = 0.5            p(s2) = 0.5

 

s1

s2

EV

d1

10

3

6.5

d2

17

-10

3.5

P(x)

0.5

0.5

 

 

 

  1. Scenario: We are almost certain of a strong demand, with probability 0.9.  Think about how this influences the cutoffs.

P(s1) = 0.9            p(s2) = 0.1

 

s1

s2

EV

d1

10

8

9

d2

12

-1

5.5

P(x)

0.9

0.1

 

 

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