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# Use the information below to answer the following question(s). Hats-R-Us would like to produce a new ...

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7 months ago
Use the information below to answer the following question(s).

Hats-R-Us would like to produce a new design of hats for the upcoming Major league Baseball World Series. They need to decide to produce a large quantity or small quantity of hats prior to the event starting. Eventual demand for this new design will be strong or weak with a 50/50 chance of each level occurring. The following table shows the payoff for each combination of production size and demand level, in thousands of dollars.

Hats-R-Us also has the option of conducting a market survey at a cost of $10,000 to acquire more accurate information about the likelihood of each demand level. If the survey results are positive, there is an 83% probability that the eventual demand for the new hat design will be strong. If the survey results are negative, there is a 23% probability that the eventual demand for the new hat design will be strong. Construct a decision tree to answer the following set of questions. The expected monetary value, in thousands of dollars, for a large production quantity if Hats-R-Us conducts a market survey and the survey results are negative is _________. ▸$78.0

▸ $161.2 ▸$226.3

▸ \$319.5
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redmareredmare
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