Question

Panda Express is about to open a new store. Three locations are under consideration, with possible outcomes (depending on demand) as shown in the table to the right. The three states of demand have known probabilities: Low = 25%, Medium = 35%, and High = 40%. Low Location (25%) Medium (35%) High (40%) Large 25 60 95 30 65 75 Medium Small 50 60 65 . Which location size(s) will give the highest expected monetary value? ]

Answer 1

To determine which location size will give the highest expected monetary value, calculate the expected value for each location size based on the probabilities and outcomes provided.

Step-by-step explanation:

To determine which location size will give the highest expected monetary value, we need to calculate the expected value for each location size based on the probabilities and outcomes provided.

1. For the 'Large' location size, the expected monetary value can be calculated by multiplying each outcome by its corresponding probability and summing the results. For example, for the 'Low' demand, the expected monetary value is (25% * $25) + (35% * $60) + (40% * $95) = $50 + $21 + $38 = $109.
2. Repeat the above step for the other location sizes ('Medium' and 'Small') to calculate their respective expected monetary values.
3. Compare the three expected monetary values and choose the location size with the highest value as the one that will give the highest expected monetary value.

Based on the calculations, the location size that will give the highest expected monetary value will be the one with the highest value calculated.