Two Buns burger joint is weighing three capacity expansion alternatives: small, medium, and large shops. Whatever capacity choice is made, the market conditions for the burgers can be described as "moderate" or "strong." The probability of a moderate market situation is estimated to be 40 percent; and a strong market situation has a probability of 60 percent. The payoffs are as follows.
$$\begin{array} { | l | c | c | }
\hline & \text { Moderate Market Conditions } & \text { Strong Market Conditions } \
\hline \text { Small shop } & \$ 25,000 & \$ 50,000 \
\hline \text { Medium shop } & \$ 20,000 & \$ 70,000 \
\hline \text { Large shop } & - \$ 5,000 & \$ 90,000 \
\hline
\end{array}$$ Which capacity choice should the company make?

Question

Two Buns burger joint is weighing three capacity expansion alternatives: small, medium, and large shops. Whatever capacity choice is made, the market conditions for the burgers can be described as "moderate" or "strong." The probability of a moderate market situation is estimated to be 40 percent; and a strong market situation has a probability of 60 percent. The payoffs are as follows.
 $$\begin{array} { | l | c | c | } 
\hline & \text { Moderate Market Conditions } & \text { Strong Market Conditions } \
\hline \text { Small shop } & \$ 25,000 & \$ 50,000 \
\hline \text { Medium shop } & \$ 20,000 & \$ 70,000 \
\hline \text { Large shop } & - \$ 5,000 & \$ 90,000 \
\hline
\end{array}$$ Which capacity choice should the company make?

Quizplus · Accepted Answer

The Answer of Two Buns burger joint is weighing three capacity expansion alternatives: small, medium, and large shops. Whatever capacity choice is made, the market conditions for the burgers can be described as "moderate" or "strong." The probability of a moderate market situation is estimated to be 40 percent; and a strong market situation has a probability of 60 percent. The payoffs are as follows.
 $$\begin{array} { | l | c | c | } 
\hline & \text { Moderate Market Conditions } & \text { Strong Market Conditions } \
\hline \text { Small shop } & \$ 25,000 & \$ 50,000 \
\hline \text { Medium shop } & \$ 20,000 & \$ 70,000 \
\hline \text { Large shop } & - \$ 5,000 & \$ 90,000 \
\hline
\end{array}$$ Which capacity choice should the company make?

Two Buns Burger Joint Is Weighing Three Capacity Expansion Alternatives