Alternatives 1 and 2 in the Following Payoff Table Represent

question 80

Multiple Choice

Alternatives 1 and 2 in the following payoff table represent the two possible manufacturing strategies that the EKA manufacturing company can adopt. The level of demand affects the success of both strategies. The states of nature (S_I) represent the levels of demand for the company products. S₁, S₂, and S₃ characterize high, medium, and low demand, with probabilities of .3, .6, and .1, respectively. The payoff values are in thousands of dollars. The management believes that the weather conditions significantly affect the level of demand. 48 monthly sales reports are randomly selected. These monthly sales reports show 15 months with high demand, 28 months with medium demand, and 5 months with low demand. 12 of the 15 months with high demand had favorable weather conditions. 14 of the 28 months with medium demand had favorable weather conditions. Only 1 of the 5 months with low demand had favorable weather conditions. What is the maximum amount that the company would be willing to pay for perfect information?

• A) $95,000
• B) $112,000
• C) $7,000
• D) $24,000
• E) $17,000

---

Definitions:

Embryonic Disc

A flat plate of cells in early embryonic development that will form the embryo.

Capacitation

A physiological process that sperm must undergo within the female reproductive tract before they can successfully fertilize an egg.

Sperm

The male reproductive cell or gamete, capable of fertilizing the female ovum to produce offspring.

Mesoderm

The middle layer of an embryo in early development, which gives rise to muscles, bones, and the circulatory system.