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A firm is weighing three capacity alternatives: small, medium, and large 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 percent; strong acceptance has a probability of 60 percent. The payoff 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 = $64,000Large job shop, moderate market = -$2,000; large job shop, strong market = $96,000What capacity choice should the firm make?
May 02 2020 Read more Less More
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