criterion? What decision would be made using the pessimistic criterion?

$[$QX$]$: $3-29$ Mick Karra is the manager of MCZ Drilling Products, which

produces a variety of specialty valves for oil field equipment. Recent activity

in the oil fields has caused demand to increase drastically, and a decision

has been made to open a new manufacturing facility. Three locations are

being considered, and the size of the facility would not be the same in each

location. Thus, overtime might be necessary at times. The following table

gives the total monthly cost $($in $$1,000$ s$)$ for each possible location under

each demand possibility. The probabilities for the demand levels have been

determined to be $20\%$ for low demand, $30\%$ for medium demand, and

$50\%$ for high demand.

a$.$ Which location would be selected based on the optimistic

criterion?

b$.$ Which location would be selected based on the pessimistic

criterion?

c$.$ Which location would be selected based on the minimax regret

criterion?

d$.$ Which location should be selected to minimize the expected cost

of operation?

e$.$ How much is a perfect forecast of the demand worth?

f$.$ Which location would minimize the expected opportunity loss?

g$.$ What is the expected value of perfect information in this situation?