••• A.2 Even though independent gasoline stations have been having a difficult time, Ian Langella has been thinking abou

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••• A.2 Even though independent gasoline stations have been
having a difficult time, Ian Langella has been thinking about
starting his own independent gasoline station. Ian’s problem is to
decide how large his station should be. The annual returns will
depend on both the size of his station and a number of marketing
factors related to the oil industry and demand for gasoline. After
a careful analysis, Ian developed the following table:
SIZE OF FIRST STATION GOOD MARKET
($) FAIR MARKET
($) POOR MARKET ($)
Small

50,000
20,000

–10,000
Medium

80,000
30,000

–20,000
Large

100,000
30,000

–40,000
Very large

300,000
25,000

–160,000
For example, if Ian constructs a small station and the market is
good, he will realize a profit of $50,000.