Concept explainers
The Islander Fishing Company purchases clams for
a. For each possible purchase level (500, 1,000, or 2,000 pounds). compute the profit (or loss) for each level of demand.
b. Determine the optimal action based on the maximax criterion.
c. Determine the optimal action based on the maximax criterion.
d. Using the expected monetary value (EMV) criterion, determine the optimal number of pounds of clams the company should purchase from the fishermen. Discuss.
e. Compute the standard deviation for each possible purchase level.
f. Compute the expected opportunity loss (EOL) for purchasing 500, 1,000, and 2,000 pounds of clams.
g. Explain the meaning of the
h. Compute the coefficient of variation for purchasing 500, 1,000, and 2,000 pounds of clams. Discuss.
i. Compute the return-to-risk ratio (RTRR) for purchasing 500, 1,000, and 2,000 pounds of clams. Discuss.
j. Based on (d) and (1). would you choose to purchase 500, 1,000, or 2,000 pounds of claims? Why?
k. Compare the results of (d), (f), (h), and (i) and explain any differences.
l. Suppose that clams can be sold to restaurants for
m. What would he the effect on the results in (a) through (k) if the probability of the demand for 500, 1,000, and 2,000 clams were 0.4, 0.4, and 0.2, respectively?
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