Q.2 Even though independent gasoline stations have been having a difficult time, Susan Helms has been thinking about starting her own independent gasoline station. Susan's problem is to decide how large her station should be. The annual returns will depend on both the size of her station and a number of marketing factors related to the oil industry and demand for gasoline. After a careful analysis, Susan developed the following table: SIZE OF FIRST STATION Small Medium Large Very large GOOD MARKET (S) 50,000 80,000 100,000 300,000 FAIR MARKET (S) 20,000 30,000 30,000 25,000 POOR MARKET (S) - 10,000 -20,000 -40,000 -160,000 For example, if Susan constructs a small station and the market is good, she will realize a profit of $50,000. 1) What is the maximax decision? ) What is the maximin decision? ) Develop a decision tree. Assume each outcome is equally likely, then find the highest EMV.

Q.2 Even though independent gasoline stations have been having a difficult time, Susan Helms has been thinking about starting her own independent gasoline station. Susan's problem is to decide how large her station should be. The annual returns will depend on both the size of her station and a number of marketing factors related to the oil industry and demand for gasoline. After a careful analysis, Susan developed the following table: SIZE OF FIRST STATION Small Medium Large Very large GOOD MARKET (S) 50,000 80,000 100,000 300,000 FAIR MARKET (S) 20,000 30,000 30,000 25,000 POOR MARKET (S) - 10,000 -20,000 -40,000 -160,000 For example, if Susan constructs a small station and the market is good, she will realize a profit of $50,000. 1) What is the maximax decision? ) What is the maximin decision? ) Develop a decision tree. Assume each outcome is equally likely, then find the highest EMV.

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

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