Figure 12-3 The Lee Company Must Choose Between Two Mutually Exclusive Alternatives

question 11

Multiple Choice

Figure 12-3
The Lee Company must choose between two mutually exclusive alternatives. With alternative 1 an inferior product will be marketed that is best suited to low levels of demand whereas alternative 2 is a superior product that is best suited to high levels of demand. There are only two possible levels of demand - high and low and the probabilities of each event occurring is 0.5. The predicted profits for each alterative are:
-Refer to Figure 12-3. Using the data above relating to the Lee Company, what is the amount of regret that is used to determine the choice of alternatives under consideration?

• A) £140,000
• B) £210,000
• C) £665,000
• D) £315,000
• E) It is not possible to apply the regret criterion to the data given.

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