For what range of probability that demand will be high, will she decide to lease the small facility?
A)0 - .25
B)0 - .33
C).25 - .5
D).33 - 1
E).5 - 1

Question

Quizplus · Accepted Answer

The expected profit from leasing the small facility is 0.5 * 100,000 - 0.5 * 50,000 = 25,000. The expected profit from leasing the large facility is 0.3 * 200,000 - 0.7 * 100,000 = 10,000. Therefore, she will decide to lease the small facility if the probability of demand being high is less than 0.25.

For What Range of Probability That Demand Will Be High