A Small Parts Manufacturer Has Just Engineered a New Product

Multiple Choice

A small parts manufacturer has just engineered a new product for the automotive industry.In order to produce the part the company can expand existing facilities,acquire a competitor,or subcontract production.The company believes the product will either experience high market demand or low market demand,with probabilities of 0.6 and 0.4,respectively.The following payoff table describes the company's decision situation.

The expected value for the subcontract production decision is

A) $250,000
B) $160,000
C) $700,000
D) $1,200,000