Question: Please help. Thanks. A small building contractor has recently experienced two successive years in which work opportunities exceeded the firm's capacity. The contractor must now
A small building contractor has recently experienced two successive years in which work opportunities exceeded the firm's capacity. The contractor must now make a decision on capacity for next year. Estimated profits under each of the two possible states of nature are as shown in the table below. Suppose after a certain amount of discussion, the contractor is able to subjectively assess the probabilities of low and high demand: P(low)=.3 and P(high)=7. Construct a graph that will enable you to perform sensitivity analysis on the problem. -Profit in $ thousands. Over what range of P (high) would the alternative of doing nothing be best? Expand? Subcontract? (Include the indifference probability in your answer ranges. Enter the lower probability in the left answer box and higher probability in the right answer box. Round your answers to 2 decimal places.) A small building contractor has recently experienced two successive years in which work opportunities exceeded the firm's capacity. The contractor must now make a decision on capacity for next year. Estimated profits under each of the two possible states of nature are as shown in the table below. Suppose after a certain amount of discussion, the contractor is able to subjectively assess the probabilities of low and high demand: P(low)=.3 and P(high)=7. Construct a graph that will enable you to perform sensitivity analysis on the problem. -Profit in $ thousands. Over what range of P (high) would the alternative of doing nothing be best? Expand? Subcontract? (Include the indifference probability in your answer ranges. Enter the lower probability in the left answer box and higher probability in the right answer box. Round your answers to 2 decimal places.)
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