A plant manager considers the operational cost per hour of five machine alternatives. The cost per hour is sensitive to three potential weather conditions: cold, mild, and warm. The following table represents the operations cost per hour for each alternative- state of nature combination: States of Nature Weather related cost per hour Alternatives Cold cost/day Mild cost/day Warm cost/day 28 38 36 42 33 39 Machine 1 Machine 2 Machine 3 32 39 38 Machine 4 29 33 34 37 40 38 Machine 5 Assume that for a randomly selected day, there is a 35% probability of cold weather, 45% probability of mild weather, and 20% probability of warm weather. What is the EVPI?

A plant manager considers the operational cost per hour of five machine alternatives. The cost per hour is sensitive to three potential weather conditions: cold, mild, and warm. The following table represents the operations cost per hour for each alternative- state of nature combination: States of Nature Weather related cost per hour Alternatives Cold cost/day Mild cost/day Warm cost/day 28 38 36 42 33 39 Machine 1 Machine 2 Machine 3 32 39 38 Machine 4 29 33 34 37 40 38 Machine 5 Assume that for a randomly selected day, there is a 35% probability of cold weather, 45% probability of mild weather, and 20% probability of warm weather. What is the EVPI?

Survey Of Economics

10th Edition

ISBN:9781337111522

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter6: Proudction Costs

Section: Chapter Questions

Problem 8SQP

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