Question: A manager has compiled estimated profits for various capacity alternatives but is reluctant to assign probabilities to the states of nature. The payoff table is

A manager has compiled estimated profits for various capacity alternatives but is reluctant to assign probabilities to the states of nature. The payoff table is as follows:

a. Plot the expected- value lines on a graph.
b. Is there any alternative that would never be appropriate in terms of maximizing expected profit? Explain on the basis of your graph.
c. For what range of P(2) would alternative A be the best choice if the goal is to maximize expected profit?
d. For what range of P(1) would alternative A be the best choice if the goal is to maximize expected profit?

STATE OF NATURE #1 $20 120 100 #2 140 80 40 Alternative Profit in $thousands.

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