A Small Parts Manufacturer Has Just Engineered a New Product

question 17

Multiple Choice

A small parts manufacturer has just engineered a new product for the automotive industry. In order to produce the part the company can expand existing facilities, acquire a competitor, or subcontract production. The company believes the product will either experience high market demand or low market demand, with probabilities of 0.6 and 0.4, respectively. The following payoff table describes the company's decision situation: The expected value for the expand facilities decision is

• A) $250,000.
• B) $160,000.
• C) $700,000.
• D) $1,200,000.

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Definitions:

Dance Studio

A designated space or facility used for the teaching, practice, and performance of dance.

Commercial Activities

Business operations or transactions aimed at generating profit, including goods or services provided to consumers.

Zoning Ordinances

Local government laws that dictate how property in specific geographic zones can be used.

Eminent Domain

The right of a government to seize private property for public use, with fair compensation to the owner.