Assume an alaska blueberry farmer has a contract with an...

Assume an Alaska blueberry farmer has a contract with an agribusiness to deliver 10 tons of blueberries at a price of $1.35/lb. Also, suppose that the contract specifies that should the contractee deliver blueberries of which 75% meet a minimum size specification, a 7% bonus will be paid. This would be an example of: Question 6 options: Allocation of value Allocation of decision rights Allocation of risk All of the above None of the above

Transcript

00:01 Hello, we have to find in the first part that is expected monetary value.

00:05 Let's suppose here expected monetary monetary value for the given data.

00:14 So we can write it as emv.

00:18 Now for this if you draw the table for the decision good, fair and poor.

00:23 We have a reason that is product 1 only and 105, 45 and 15.

00:27 So if we find the probability for good that is 0 .30 and the probability for fair we have 0 .50 and the probability for poor here we can write as 0 .20.

00:42 Now for product 1 only if we find the value of expected monetary value that is emv value.

00:48 So here we can write it as that is emv value.

00:51 Now for this we have to multiply the probability of 0 .30 with the good and probability of fair with the product of 1 only and the probability of 0 .20 with 15 and adding the term.

01:05 So here we have the final answer as that is emv value which is 57 or after multiplying 0 .30, 0 .3 with 105 plus of 0 .5 multiplied with 45 plus of 0 .2 multiplied with 15.

01:28 So this is for the product 1 only and now for the product 2 that is again similarly that is multiplying 0 .3 with a 90, 0 .3 with 90 plus of 0 .5 multiplied by 30 plus of 0 .2 multiplied with 15.

01:48 So we get the emv value for this product 2 we have that is 45.

01:55 Now for the both in the third case we have both.

02:00 So for both again multiplying 0 .3 with 85 adding 0 .50 with 95 and adding the term 0 .20 with multiplied with 25.

02:09 So finally we get the product for the emv value for both that is 108.

02:15 This is the answer for the first part.

02:18 Now in the second part we have to find from that is emv value is higher from on comparing for the first second part that emv value is higher for the both that is 108.

02:30 So from here we have to select the answer for this that is both product to introduce since here emv value is emv is higher.

02:53 So this is the answer for the second part...

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