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Calculate most that ryan should be willing to pay expert

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Reference no: EM132572084

Ryan Palmer operates a hot dog cart at the local stadium every Saturday. It is currently Thursday, and Ryan needs to inform stadium management today whether he will set up his hot dog cart inside or outside on Saturday. Ryan has watched the weather channel, and the probability of rain on Saturday is 60%. Each hot dog sells for $2.50 and the total variable cost of each hot dog is $0.80.

Ryan knows from past experience that he will likely sell the following number of hot dogs:

                      Rain            No rain

Inside         1,500                800

Outside      700                     2,200

Required:

Question a) Set up a pay-off table and determine whether Ryan should set up his hot dog cart inside or outside on Saturday.

Question b) Assume that Ryan has the opportunity to hire a weather expert who can determine with 100% certainty whether it will rain on Saturday. Calculate the most that Ryan should be willing to pay this expert.

Reference no: EM132572084

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