Exhibit 14.1 The Following Questions Are Based on the Information Below

question 41

Multiple Choice

Exhibit 14.1
The following questions are based on the information below.
An investor is considering 4 investments, A, B, C and leaving his money in the bank. The payoff from each investment is a function of the economic climate over the next 2 years. The economy can expand or decline. The following payoff matrix has been developed for the decision problem.
-Refer to Exhibit 14.1. What formula should go in cell D5 to implement the maximin decision rule?

• A) =MAX(MIN(B5:C5))
• B) =MIN(B5:C5)
• C) =AVERAGE(B5:C5)
• D) =MAX(B5:C5)

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Definitions:

Average Total

Typically refers to the average total cost, which is the total cost of production divided by the number of goods produced.

Total Variable

Expenses that change in proportion to the activity of a business, such as costs of goods sold, which vary with the level of production or sales volume.

Average Variable Cost

The variable costs of production (costs that change with output level) divided by the quantity of output, indicating the average variable cost per unit.

Producing Purses

Producing purses involves the manufacturing and assembling of various materials to create handbags and similar accessories.