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NEW QUESTION: 1
If, in addition to the estimated profits, management of the bank assesses the probabilities of high, medium, and low demands to be 0.3, 0.4 and 0.3, respectively, what is the expected opportunity loss from selecting location L4?
A. US$7.90
B. US$5.00
C. US$5.50
D. US$7.50
Answer: C
Explanation:
First, the opportunity loss matrix must be prepared:

C:\Documents and Settings\usernwz1\Desktop\1.PNG The expected opportunity loss from selecting location L4 is thus US $5.50 [($3 x 0.3) + ($4
x 0.4) + ($10 x)

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