Asked by Kierra Lewis on May 20, 2024
Verified
Consider the disaster risk decision tree model. Using the notation from the model, what is the expected monetary value (cost) of choosing two suppliers?
A) 2C
B) [1-P(2) ] × 2C + P(2) × (L + 2C)
C) 2C + SL
D) P(2) × 2C + [1-P(2) ] × (L + 2C)
E) 2C + (S+U2) L
Expected Monetary Value
A statistical technique in decision-making that calculates the average outcome when the future includes scenarios that may or may not happen.
Disaster Risk
The potential loss or damage that could result from the interaction of natural or human-made hazards with vulnerable conditions.
Suppliers
Businesses or individuals that provide goods or services to another entity along a supply chain, playing a vital role in production and distribution processes.
- Scrutinize the disaster risk decision tree model, particularly concentrating on formula derivation and the conduct of calculations.
Verified Answer
GG
Göktu? GökmenMay 25, 2024
Final Answer :
B
Explanation :
The expected monetary value (EMV) of choosing two suppliers incorporates the probability of a disaster occurring with two suppliers, P(2), and the costs associated with both scenarios (disaster and no disaster). The cost without a disaster is simply twice the cost of contracting the suppliers, 2C. If a disaster occurs, the cost includes the loss L plus the cost of the suppliers, 2C. The formula [1-P(2)] × 2C + P(2) × (L + 2C) accurately represents this calculation, taking into account both the probability of a disaster and the associated costs.
Learning Objectives
- Scrutinize the disaster risk decision tree model, particularly concentrating on formula derivation and the conduct of calculations.