Repeat Exercise 25.27, given that 12 out of 100 households responded affirmatively. There is a…

Repeat Exercise 25.27, given that 12 out of
100 households responded affirmatively.

There is a garbage crisis in a major
Australian city – too much garbage and nowhere to put it. As a consequence, in
addition to recycling bottles, aluminium cans and newspapers, the idea of
processing kitchen waste to make compost is proposed as one way of reducing the
garbage. A waste-management company is willing to begin processing kitchen
waste. It is only profitable to do so, however, if a sufficiently large
proportion of households are willing to participate. In this city, one million
households are
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Repeat Exercise 25.27, given that 12 out of
100 households responded affirmatively.

There is a garbage crisis in a major
Australian city – too much garbage and nowhere to put it. As a consequence, in
addition to recycling bottles, aluminium cans and newspapers, the idea of
processing kitchen waste to make compost is proposed as one way of reducing the
garbage. A waste-management company is willing to begin processing kitchen
waste. It is only profitable to do so, however, if a sufficiently large
proportion of households are willing to participate. In this city, one million
households are potential participants. After some analysis it was determined
that for every 1000 households that participate in the program, the
contribution to profit is $500. It was also discovered that fixed costs are $55
000 per year. It is believed that 50 000, 100 000, 200 000 or 300 000
households will participate with probabilities of 0.5, 0.3, 0.1 and 0.1,
respectively. A preliminary survey was performed wherein 25 households were
asked if they would be willing to be part of this program. Only three of the 25
responded affirmatively. Incorporate this information into the decision-making
process to decide whether the waste-management company should proceed with the
venture.

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