The following payoff table shows the profit for a decision problem with two states of nature and two decision alternatives: State of Nature
Decision Alternative s1 s2
d1 10 1
d2 7 3
(a) Suppose P(s1)=0.2 and P(s2)=0.8. What is the best decision using the expected value approach? Round your answer in one decimal place.

The best decision is decision alternative
d2
, with an expected value of
3.8
.

(b) Perform sensitivity analysis on the payoffs for decision alternative d1. Assume the probabilities are as given in part (a), and find the range of payoffs under states of nature s1 and s2 that will keep the solution found in part (a) optimal. Is the solution more sensitive to the payoff under state of nature s1 or s2? Round your answer in two decimal places.

The solution is more sensitive to
s2
, as an increment of
20
for d1(s2) causes a break even between the decision alternatives, whereas it takes an increment of
50
, to provide the same effect for d1(s1).

the definition of a small business is an independently owned and operated company that is limited in size and in revenue depending on the industry. a local bakery that employs 10 people is an example of a small business. a manufacturing facility that employees less than 500 people is an example of a small business.

answer: in the short-run firms will respond by raising the price of turkey.

explanation: initially the long-run equilibrium is at a price of $5 per pound of turkey and a quantity of 50 million pounds per year. now, when webmd claims that a protein found in turkey will increase your expected lifespan by 4 years. the consumers demand for turkey will increase at every price shifting the demand curve to the right from d1 to d2. while, there will be no change in the supply curve in the short-run as it is not possible for producers to adjust supply so quickly. as a result the new equilibrium will occur at a higher price and a higher quantity of turkey.

thus, in the short run firms will respond by increasing the price of turkey, selling more quantity at a higher price and earning economic profits.