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A Firm Is Weighing Three Capacity Alternatives: Small, Medium, and Large

question 49

Essay

A firm is weighing three capacity alternatives: small, medium, and large job shop. Whatever capacity choice is made, the market for the firm's product can be "moderate" or "strong." The probability of moderate acceptance is estimated to be 40%; strong acceptance has a probability of 60%. The payoffs are as follows. Small job shop, moderate market = $24,000; Small job shop, strong market = $54,000. Medium job shop, moderate market = $20,000; medium job shop, strong market = $64,000. Large job shop, moderate market = -$2,000; large job shop, strong market = $96,000. Which capacity choice should the firm make?


Definitions:

Institutional Support

Institutional support refers to the assistance and resources provided by organizations or institutions to individuals or groups, often to foster growth, development, or well-being.

Optimal Contact

A concept in social psychology that suggests there is an ideal level of interaction between individuals or groups to reduce prejudice and improve intergroup relations.

Stereotyping

The practice of attributing a fixed set of characteristics to members of a group, often oversimplifying their qualities or behaviors.

Positive Change

Alterations in the individual or environment that lead to improvements or advantageous outcomes.

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