Find the optimal solution based on the total cost

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Solve the following minimizing-cost problem by using a decision tree.

A firm has 2 options to produce a new product: either using a high-tech process or a low-tech process. The fixed cost of a high-tech is $50,000, but that of a low-tech is only $25,000. However, the variable cost is $10 for a high-tech while $15 for a low-tech. If the market is good, sales would be 10,000 units. Otherwise, sales would be only 6,000 units. The probability of good markets is 0.60 and the probability of bad markets is 0.4. Please find the optimal solution based on the total cost.

Reference no: EM132684062

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