A Firm Is Considering the Decision of Investing in New $$\text { The econdmy }$$

question 53

Multiple Choice

A firm is considering the decision of investing in new plants.The following is the profit payoff matrix under three conditions: it does not expand,it builds two new plants,or it builds one new plant.Three possible states of nature can exist--no change in the economy,the economy contracts and the economy grows.The firm has no idea of the probability of each state. $$\text { The econdmy }$$
$\begin{array}{l|ccc}& \text { expands } & \text { contracts } & \text { unchanged } \\\text { no new plants } & \$ 20 \text { million } & -\$ 3 \text { million } & \$ 4 \text { million } \\1 \text { new plant } & \$ 30 \text { million } & -\$ 6 \text { million } & \$ 6 \text { million } \\2 \text { new plants } & \$ 40 \text { million } & -\$ 12 \text { million } & \$ 8 \text { million }\end{array}$ What decision would be made using the minimax regret rule?

• A)no new plants
• B)one new plant
• C)two new plants
• D)not enough information to tell

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Definitions:

Organizational Commitment

The emotional and psychological attachment of an employee to their organization, influencing their willingness to continue working there.

Agreeableness

A personality trait characterized by compassion and cooperativeness towards others.

Behavioural Plasticity

The capacity of an organism to modify its behavior based on experience or environmental changes.

Personality Characteristic

Innate or acquired traits that define an individual's behavior, thinking patterns, and emotional reactions, contributing to their unique personal identity.