Problem 1 Kelly, the manager of The Rush, is thinking about adding a new 1 hour

Question

Problem 1 Kelly, the manager of The Rush, is thinking about adding a new 1 hour 6 am class on Monday morning. Students have indicated some interest in this class. The table below shows Kelly's belief of the possible class size along with the possible revenue she could make based on the number of students who show up. Kelly pays the fitness instructor $40 per hour and the cost of opening the facility an extra hour (e.g. lighting, electricity, etc...) is estimated at $8. Possible class size Probability Revenue 0.07 0.07 0.16 0.23 0.37 0.10 150 12 27 39 58 100 5-9 10 or more a. Assuming that Kelly is a pessimist (e.g. makes decisions based on the Maximin criterion), what is the best course of action? b. What is the best decision under the expected value criterion?

Explanation / Answer

Assuming that Kelly is a pessimist. The kelly add one hour class on monday morning and as per the given table the best course of action is she take the class by possible class size is 5 or more.

From the given table we construct the expected value as follows

From the above table the expected total revenue is 74.31 in that the total expenditure is 48.therefore the best decision crieteria is possible class size is 5 or more

Possible Class Size Prob Revenue Prob*Revenue 1 0.07 12 0.84 2 0.07 27 1.89 3 0.16 39 6.24 4 0.23 58 13.34 9-May 0.37 100 37 10 or more 0.1 150 15 Total Expected 74.31

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.