Question: answer a) Suppose P(Recession) = 0.3, P(Stable)= 0.1, and P(Expansion) = 0.6. What is the expected value of each action? EV(Out-Source) = 279 thousand dollars

answer

a) Suppose P(Recession) = 0.3, P(Stable)= 0.1, and P(Expansion) = 0.6. What is the expected value of each action? EV(Out-Source) = 279 thousand dollars EV(In-House) = 311 thousand dollars b) What is the best choice using the expected-value approach? Choose the correct answer below. () A. Out-sourcing the production is the better action since it has the lower expected value. @) B. Doing the production in-house is the better action since it has the greater expected value. () . QOut-sourcing the production is the better action since it has the greater expected value. () D. Doing the production in-house is the better action since it has the lower expected value. () E. Both actions are equally good since they both have the same expected value

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