Exhibit 10-1 a Company Is in the Planning Phase of Constructing a Constructing

question 28

Essay

Exhibit 10-1
A company is in the planning phase of constructing a new production facility. It wants to build a simulation model for the economics of the facility, and one key uncertain input is the construction cost. For each of the scenarios in the questions below, choose an "appropriate" distribution, together with its parameters, and explain your choice.
-Refer to Exhibit 10-1.Management believes the facility construction time will be somewhere from 5 to 9 months.They believe the probabilities of the extremes (5 and 9 months)are both 10%,and the probabilities will vary linearly from those endpoints to a most likely value at 7 months.

---

Definitions:

Inferior Good

An inferior good is a type of product that sees an increase in demand as consumers’ income decreases, contrary to what is observed with normal goods.

Complement

A good or service that, when used together with another, enhances mutual use and utility, often impacting demand in correlated ways.

Public Service Announcements

Messages broadcasted to inform or educate the public on issues of public interest without commercial intention.

Mandatory Health Warnings

Compulsory advisories placed on products, such as cigarettes, to inform consumers of health risks.