A Toy Manufacturer Has Three Different Mechanisms That Can Be

question 75

Essay

A toy manufacturer has three different mechanisms that can be installed in a doll that it sells. The different mechanisms have three different setup costs (overheads) and variable costs and, therefore, the profit from the dolls is dependent on the volume of sales. The anticipated payoffs are as follows.
$$\begin{array} { | l | r | r | r | } \hline \text { Profit } & { \text { Light } } & \text { Medium } &{ \text { Heavy } } \\\hline \text { Probability } & 0.23 & 0.37 & 0.4 \\\hline \text { Wind-up } & 1000 & 700 & 1150 \\\hline \text { Pneumatic } & 500 & 800 & 1350 \\\hline \text { Electrical } & 700 & 900 & 1100 \\\hline\end{array}$$ a. What is the EMV of each decision alternative?
b. Which action should be selected?
c. What is the expected value with perfect information?
d. What is the expected value of perfect information?

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Definitions:

Rhythm

The patterned, recurring sequence of events, sounds, or activities, often associated with music, dance, or the natural occurrences in life.

Cadence

The rhythmic flow or pattern of sounds in language or the sequence of sounds in speech, often used in poetry, or the pace and tempo in music and physical movement.

Mother's Language

The native language spoken by one's mother, often the first language a child is exposed to and learns.

Babbling

The production of speech-like but meaningless sounds, commonly practiced by infants as a precursor to the development of language.