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The production of the company is
2000
4000
The selling price is $20/unit and variable cost
Is 4 . The comany is deciding the supply level
The 20% of the production would be lost and lost would be scarp at $.4.
Sir how we construct the payoff table sir i know from your lecture how to construct it but i am not able to take account of lost 20%If they produce 2000 then they will lose 400 (20% of 2,000) and will be able to sell 1,600.
Therefore the cost will be 2,000 x $4 = $8,000, and the total revenue will be (1,600 x $20) + (400 x $4) = $33,600. The profit will be the difference.
(Does the book in which you found the question not show the answer? 🙂 )
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