13. A manager is faced with the following decision alternatives to build a plant
ID: 356357 • Letter: 1
Question
13.
A manager is faced with the following decision alternatives to build a plant of sizes: Small (S), Medium (M), Med-Large (ML), Large (L), and Extra_Large(XL). Future profits depend on if the economy is Good (G) or Poor (P). The payoff data is as follows: For Poor future economy: S:$10 (in thousands), M: 20, ML: 30, L: 40, and XL: 60. For Good future economy: S: $30, M: 40, ML: 45, L: 35, XL: 20.
The maximax strategy would be:
A)
small
B)
medium
C)
med.-large
D)
large
E)
ex-large
13.
A manager is faced with the following decision alternatives to build a plant of sizes: Small (S), Medium (M), Med-Large (ML), Large (L), and Extra_Large(XL). Future profits depend on if the economy is Good (G) or Poor (P). The payoff data is as follows: For Poor future economy: S:$10 (in thousands), M: 20, ML: 30, L: 40, and XL: 60. For Good future economy: S: $30, M: 40, ML: 45, L: 35, XL: 20.
The maximax strategy would be:
A)
small
B)
medium
C)
med.-large
D)
large
E)
ex-large
Explanation / Answer
Answer: e. Extra large for both economy gives the maximum payoff, 60+20= $80 (in thousands), which is higher than any other option.
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