MusicLOVER8109
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The Video Game Supply Company (VGS) is deciding whether to set production next year at 2,000, 2,500, or 3,000 units. The production cost is $5 per unit. VGS estimates that demand will be 1,800 units with the probability of 0.2, 2,400 units with the probability of 0.5, or 3,200 units with the probability of 0.3. The selling price is $8 per unit. The leftover units do not have any values.
a.Determine the expected profit of each alternative and indicate what should be the optimal production target.
b.Determine the expected profit with perfect information about the states of nature.
c.Determine the expected value of perfect information.
a.Determine the expected profit of each alternative and indicate what should be the optimal production target.
b.Determine the expected profit with perfect information about the states of nature.
c.Determine the expected value of perfect information.