4.4 Do problem 3 parts c (construct payoff table) and e (converting payoff table

Question

4.4 Do problem 3 parts c (construct payoff table) and e (converting payoff table to opportunity table) in page 671 (10 pts) Converting the payoff table to opportunity loss (OL) table Refer Table 3 or Table 4 in pages 670-1 of textbook For the Payoff table (Table 3) You may think this way AT: Gradual A2 Concentrated -5 10 E2: High demand . if in Low demand, E1, you will choose gradual alternative and profit is 1, OL of gradual action is 0, but OL of the Concentrated alternative is 6, because you lose 5 in fact you could make 1, so the amount of regret(OL) is 6 OL-largest payoff in the line (event)-the payoff of the cell If in High demand. E2, you will choose Concentrated, OL is 0, for Gradual OL= · 10-4=6 Key is to think in one event i.e. low demand at a time and move to next event i.e. high demand The Opportunity Loss table is: :Grac A2 Concentrated ET:Tow demand E2: High demand 6 (104) 0

Explanation / Answer

Solution:

If a small factory has a capacity of 50,000 and a cost of $200,000, then the profit for various levels of demand can be calculated. If demand is 10,000, payoff will be as follows:

Payoff = Revenue -Cost

= Quantity *Price -Cost

= 10000*10 - 200000

= -100000

Similarly, if demand is 20,000, payoff will be as follows:

Payoff = 20000*10 - 200000

= 0

Then, if demand is 50,000

Payoff = 50000*10 - 200000

= 300000

If demand is 100,000 the factory will still only be able to supplu 50,000, so the payoff will be 300000.

b) If a small factory has a capacity of 100,000 and a cost of $400,000, then the profit for various levels of demand can be calculated. If demand is 10,000, payoff will be as follows:

Payoff = Revenue -Cost

= Quantity *Price -Cost

= 10000*10 - 400000

= -300000

Similarly, if demand is 20,000, payoff will be as follows:

Payoff = 20000*10 - 400000

= -200000

Then, if demand is 50,000

Payoff = 50000*10 - 400000

= 100000

If demand is 100,000

Payoff = 100000*10 - 400000

= 600000

c) The payoff possibilities found in a and b into the following payoff table:

Payoff Table:

small Factory Large Factory

10,000 -100000 -300000

20,000 0 -200000

50,000 300000 100000

100,000 300,000 600,000

Related Questions

Navigate

• Browse (All)
• Browse 4
• Subjects

---

---

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