High School

Use the following Profit decision tree. Assume the Expected Value (EV) at node 2 is 97.6 and EV at node 5 is 85.3.

What is the maximum reasonable cost beyond which we do not want to conduct market research?

A. $97.6
B. $85.3
C. $12.3
D. $0 (No cost is acceptable)

Answer :

Final answer:

The maximum reasonable cost beyond which we do not want to conduct market research is $85.3.

Explanation:

To determine the maximum reasonable cost beyond which we do not want to conduct market research, we need to consider the expected values (EV) at node 2 and node 5. The EV at node 2 is 97.6 and the EV at node 5 is 85.3. Since we want to maximize profit, we should not conduct market research if the cost exceeds the EV at node 5, which is 85.3. Therefore, the maximum reasonable cost is $85.3.

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