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You own a factory that can produce up to 1M widgets per year. Each widget costs...

You own a factory that can produce up to 1M widgets per year. Each widget costs $1.50 to produce. The market price of a widget will be either $2.50 (good economy) or $1.75 (bad economy) next year. All production, costs, and revenues occur at the end of the year. If you can wait until the end of the year to decide to produce or not, construct the set of possible payoffs at time 1 of the factory. NOTE: Do not attempt to find the value of the project.

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Good economy Bad economy $2.50 $1.75 Market price of a widget Widget cost $1.50 $1.50 Possible pay off per widget $1.00 $0.25

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