Use This Information to Answer the Following Questions

question 28

Essay

Use this information to answer the following questions.
A bakery must decide how many pies to prepare for the upcoming weekend.The bakery has the option to make 50,100,or 150 pies.Assume that demand for the pies can be 50,100,or 150.Each pie costs $5 to make and sells for $7.Unsold pies are donated to a nearby charity center.Assume that there is no opportunity cost for lost sales.
-Refer to the information above.Assume that the bakery (see problem 7)has obtained the following probability information regarding demand for the pies: P(50)= 0.3,P(100)= 0.5,and P(150)= 0.2.
a.Which alternative should be chosen using the expected monetary value (EMV)criterion?
b.What is the expected value under certainty?
c.What is the expected value under perfect information (EVPI)?

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Definitions:

Elasticity

An indicator of the degree to which the demand or supply for a product varies following a price change.

Price Elasticity

A measure of how much the quantity demanded of a good responds to a change in the price of that good, indicating the sensitivity of consumers to price changes.

Printer

A device that converts digital documents into physical copies on paper or other printing materials.

Quantity Demanded

The total amount of a good or service that consumers are willing and able to purchase at a given price over a specified period of time.