Question

Myrtle Air Express decided to offer direct service from Cleveland to Myrtle Beach. Management must decide between a full-price service using the company's new fleet of jet aircraft and a discount service using smaller-capacity commuter planes. It is clear that the best choice depends on the market reaction to the service Myrtle Air offers. Management developed estimates of the contribution to profit for each type of service based upon two possible levels of demand for service to Myrtle Beach: strong and weak. The following table shows the estimated quarterly profits (in thousands of dollars):

	Demand for Service
Service	Strong		Weak
Full price	$960		-$490
Discount	$370		$320

(a)	What is the decision to be made, what is the chance event, and what is the consequence for this problem?
	How many decision alternatives are there?
	Number of decision alternatives =
	How many outcomes are there for the chance event?
	Number of outcomes =
(e)	Use sensitivity analysis to determine the range of demand probabilities for which each of the decision alternatives has the largest expected value.
	If required, round your answer to four decimal places. is the preferred service, if probability of strong demand is less than .

Answer 1