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You can produce 1,000 umbrellas at a production cost of $1.75 per unit. Alternatively, you may...

You can produce 1,000 umbrellas at a production cost of $1.75 per unit. Alternatively, you may produce 3,000 umbrellas at a cost of $2.25 per unit. Umbrella sales this year are highly dependent on weather, and you believe there is a 0.2 chance of high demand due to bad weather, and a (1-0.2) chance of low demand. If there is high demand, you can sell the umbrellas for $4, and if there is low demand, you can only get $2 per widget. How many umbrellas should you choose to produce if you remain uncertain about the weather?

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jeff jeffy answered 1 year ago
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