In the table below are selected values for the OC curve associated with the acceptance sampling plan n=50, c=1. (Watch out--the points are not evenly spaced.) Assume that upon failed inspection, defective items are replaced. Calculate the AOQ for each data point. (You may assume that the population is much larger than the sample.) Plot the AOQ curve. At approximately what population defective rate is the AOQ at its worst? Explain how this happens. How well does this plan meet the specifications of AQL=0.0050, α =0.05; LTPD=0.05, β =0.10? Discuss.
Definitions:
Deadweight Losses
Economic inefficiencies that occur when the market equilibrium is not achieved, often due to external interference such as taxes or monopolies, resulting in a loss of total surplus.
Distort Incentives
When external factors or policies alter the natural motivations that influence individual or business decisions, potentially leading to inefficient outcomes.
Revenue
The income generated from normal business operations and before any expenses are deducted.
Excise Tax
A tax imposed on specific goods, services, or activities, such as gasoline, cigarettes, or gambling, usually intended to discourage their use or to raise revenue.
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