A Plant Manager Considers the Operational Cost Per Hour of Five

question 104

Multiple Choice

A plant manager considers the operational cost per hour of five machine alternatives.The cost per hour is sensitive to three potential weather conditions: cold,mild,and warm.The following table represents the operations cost per hour for each alternative-state of nature combination: Assume that for a randomly selected day,there is a 30% probability of cold weather,50% probability of mild weather,and 20% probability of warm weather.What is the EVPI?

• A)$5.8
• B)$6.6
• C)$1.6
• D)$3.2
• E)$7.4

---

Definitions:

Microeconomics

The branch of economics that focuses on the actions of individuals and industries, like the dynamics between buyers and sellers, and the factors that influence the choices of individuals and businesses.

Private Enterprise System

An economic system where private individuals or businesses own capital goods and operate with minimal government intervention.

Equilibrium Price

The market price at which the quantity of goods supplied equals the quantity of goods demanded, resulting in a stable market condition.

Economic Choices

Decisions made by individuals, firms, or governments regarding the allocation of resources and the distribution of goods and services.