A Local Business Owner Is a Bit Uncertain of the Demand

question 36

Essay

A local business owner is a bit uncertain of the demand forecast, and is timidly approaching the capacity decision for a business he is about to open. Here's how he describes the decisions that confront him over the next two years."First, I have to choose between building a large plant initially and building a small one that has room to expand. Or I could rent now, and decide whether to build next year. That one, too, could be the large version or the small. If I build small, then after one year, I can review how good business was, and decide whether to expand. If I build large, there is no further option to enlarge."Do not concern yourself with probabilities or payoff values .Simply draw the tree that illustrates the manager's decision alternatives and the chance events that go along with them. Use standard symbols for decision tree construction, and label all parts of your diagram carefully. To simplify, assume that business in the first year, and in the second, can be only "good" or "bad."

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Definitions:

Variable Y

A symbolic representation of a dependent variable that is subject to change based on other variables' values within a mathematical function or an experiment.

Genetic Disorder

A disease or condition caused by an abnormality in an individual's DNA, ranging from minor mutations to major alterations affecting multiple genes.

Chromosome

A thread-like structure of nucleic acids and protein found in the nucleus of most living cells, carrying genetic information in the form of genes.

Fetus

The product of conception from the end of the eighth week to the moment of birth.