The Owner of Tastee Cookies Needs to Decide Whether to Lease

Multiple Choice

The owner of Tastee Cookies needs to decide whether to lease a small, medium, or large new retail outlet. She estimates that monthly profits will vary with demand for her cookies as follows:

If she feels there is a 30 percent chance that demand will be high, what is her expected value of perfect information?

A) $1,600
B) $1,100
C) $1,000
D) $900
E) $500