The many identical residents of Whoville love drinking Zlurp. Each resident has the following willingness to pay for the tasty r

Answer:

a) the small bus

b) the medium or large bus

c) the small bus

Explanation:

a) using the maximin criterion, the manager aims to maximize the least possible profit (a pessimistic approach), which results in the following profits:

Bus size Demand

Low Medium High

Small 50 60 70 → minimum profit = 50

Medium 40 80 90 → minimum profit = 40

Large 20 50 120 → minimum profit = 20

Thus, the optimal choice yielding the highest minimum profit is the small bus.

b) applying the maximin criterion, the manager will seek to minimize potential maximum losses, determining losses based on the best profit scenario:

Bus size Demand

Low Medium High

Small 0 -20 -50 → maximum loss = -50

Medium -10 0 -30 → maximum loss = -30

Large -30 -30 0 → maximum loss = -30

Hence, the option that bears the least maximum loss is either the medium or large bus.

c) for calculating the expected value of each option:

small = 30/100*50 + 30/100*60 + 40/100*70 = 61

medium = 30/100*40 + 30/100*80 + 40/100*90 = 72

large = 30/100*20 + 30/100*50 + 40/100*120 = 69

The small bus turns out to be the best choice, as it has the highest expected profit.

Answer:

The opportunity cost for Janet to create a pizza amounts to 0.67 gallons of root beer, while for Megan it is 0.71 gallons of root beer.

Janet possesses an absolute advantage in pizza making, and Janet also has a comparative advantage in this activity.

When it comes to trading, Janet will exchange pizza for root beer. The price of pizza can be represented by the amount of root beer in gallons. To ensure both roommates benefit, the highest trade price for pizza is 0.71 gallons of root beer, while the minimum price allowing for mutual benefit is 0.67 gallons of root beer per pizza.

Explanation:

For Janet, the cost to produce one gallon of root beer is 3/2, which equals 1.5 pizzas. Janet's cost for making a pizza is calculated as 2/3, resulting in 0.67 gallons of root beer.

As for Megan, her cost to produce a gallon of root beer is 7/5, translating to 1.4 pizzas. Megan's cost of producing a pizza is 5/7, which equals 0.71 gallons of root beer.

Opportunity costs represent the additional expenses or benefits forfeited when electing one action or investment in place of another option. For instance, Janet can create either 1.5 pizzas or 1 gallon of root beer in a span of 3 hours, but she cannot accomplish both simultaneously; she must make a choice between the two options.