Problem 4:Heidi manages a firm that is going to start operating in a new market. She has the option oftargeting either "high end" consumers or "low end" consumers. She has some uncertaintyregarding actual market conditions in each of these two segments. Very loosely, she thinks thatmarket conditions in each segment could be either "favorable" or "unfavorable." Theprobability of "favorable" versus "unfavorable" conditions in each market segment (along withher resulting profit in each case) is:MarketHigh endLow end3b. If p= and q==/²/²4q1-qa. Draw the decision tree for this decision problem.ConditionFavorableUnfavorableFavorableUnfavorablec. Suppose p=Probabilityр1-pd. Suppose q=Profit$800,000$200,000$500,000$400,000p=²/1.fFor what range of q should she serve the "low end" consumers?Which segment should she serve? Explain.3For what range of p should she serve the "low end" consumers?4

Answered: Heidi manages a firm that is going to…

A First Course in Probability (10th Edition)

10th Edition

ISBN:9780134753119

Author:Sheldon Ross

Publisher:Sheldon Ross

Chapter1: Combinatorial Analysis

Section: Chapter Questions

Problem 1.1P: a. How many different 7-place license plates are possible if the first 2 places are for letters and...

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2. A group of medical professionals is considering the construction of a private clinic. If the medical demand is high (i.e., there is a favorable market for the clinic), the physicians could realize a net profit of $100,000. If the market is not favorable, they could lose $40,000. Of course, they don't have to proceed at all, in which case there is no cost. In the absence of any market data, the physicians' best guess is that there is a 50-50 chance the clinic will be successful. a. Construct a decision tree to help analyze this problem. b. What should the medical professionals do?
The DoorCo Corporation is a leading manufacturer of garage doors. All doors are manufactured in their plant in Carmel, Indiana, and shipped to distribution centers or major customers. DoorCo recently acquired another manufacturer of garage doors, Wisconsin Door, and is considering moving its wood door operations to the Wisconsin plant. Key considerations in this decision are the transportation, labor, and production costs at the two plants. Complicating matters is the fact that marketing is predicting a decline in the demand for wood doors. The company developed the following three scenarios Scenario 1 (Probability of happening 0.15): Demand falls slightly, with no noticeable effect on productionScenario 2 (Probability of happening 0.40): Demand and production decline 20%Scenario 3 (Probability of happening 0.45): Demand and production decline 40% The following table shows the total costs under each decision and scenario.
2. Marty Schatz owns and manages a chili dog and soft drink store near the campus. Although Marty can service 30 customers per hour on the average, he only gets 20 customers per hour Because Marty could wait on 50% more customers than actually visit his store, it doesn't make sense to him that he should have any waiting lines. Marty hires you to examine the situation and to determine some characteristics of his queue. After looking into the problem, you find this to be a system. What are your findings?
You are considering opening a book store near the campus, and you have begun an analysis of the situation. There are three possible sites under consideration. One is relatively small, the second is of medium size, while the third is large. If you open at site 1 and demand is good, you will generate a profit of $ 18,000. If demand is moderate, your profit is $12000 while with low demand, you will lose $ 6,000. If you open at site 2 and demand is high you will generate a profit of $ 28,000, if demand is moderate you will generate a profit of $1400 but you will lose $11,000 if the demand is low. If you open at site 3 and demand is high you will generate a profit of $ 42,000, if demand is moderate, you will generate a loss of $5000 and you will lose $18,000 if the demand is low You also have the option of not opening either. You believe that there is a 45% chance that the demand will be high, 25% chance that demand will be moderate. A market research study will cost $ 7,000. The…
you are analyzing the variables that explain the returns on the stock of the Boeing Com- pany. Because overall market returns are likely to explain a part of the returns on Boeing, you decide to include the returns on a value-weighted index of all the companies listed on the nySe, aMeX, and naSdaQ as an independent variable. Further, because Boeing is a large company, you also decide to include the returns on the S&P 500 index, which is a value-weighted index of the larger market-capitalization companies. Finally, you decide to include the changes in the uS dollar’s value. to conduct your test, you have collected the following data for the period 1990–2002. Rt = monthly return on the stock of Boeing in month t RALLt = monthly return on a value-weighted index of all the companies listed on the nySe, aMeX, and naSdaQ in month t RSPt = monthly return on the S&P 500 index in month t ΔXt = change in month t in the log of a trade-weighted index of the foreign exchange value of the uS…
There are several risks and costs associated with the airline's decision to overbook flights. If too many passengers show up, the airline may need to offer incentives for customers to give up their seats, which can be costly. If too few passengers show up, the airline may be forced to fly with empty seats, resulting in lost revenue. Furthermore, overbooking can lead to negative publicity and damage to the airline's reputation if too many customers are bumped from their flights. In terms of strategy, the airline must weigh the potential benefits of overbooking (maximizing revenue by filling as many seats as possible) against the potential risks and costs. The airline may also consider adjusting its overbooking policy based on factors such as the route, time of day, and historical data on no-show rates for specific flights. Overall, effective demand forecasting and capacity planning are crucial for the airline to optimize its operations and profitability while minimizing negative…

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