Refer to the Following:
a Firm Making Production Plans Believes

question 31

Multiple Choice

Refer to the following:
A firm making production plans believes there is a 30% probability the price will be $10, a 50% probability the price will be $15, and a 20% probability the price will be $20. The manager must decide whether to produce 6,000 units of output (A) , 8,000 units (B) or 10,000 units (C) . The following table shows 4 possible outcomes depending on the output chosen and the actual price.
$$\begin{array} { c c c c } & { \text { Prodi } ( \text { Loss } ) \text { when price is } } \\\hline \text { Prodiction } & \$ 10 & \$ 15 & \$ 20 \\\hline \text { G,000 } ( A ) & - \$ 200 & \$ 400 & \$ 1,000 \\\text { B,000 } ( B ) & - \$ 400 & \$ 600 & \$ 1,600 \\10,000 ( C ) & - \$ 1,000 & \$ 800 & \$ 3,000\end{array}$$
-For the above payoff matrix, suppose the manager has no idea about the probability of any of the three prices occurring. If the maximax rule is used how much will the firm produce?

• A) 6,000
• B) 8,000
• C) 10,000
• D) can't use this rule to make the decision

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Definitions:

Minimum Contacts

A legal standard that determines when it is appropriate for a court in one jurisdiction to assert personal jurisdiction over a defendant from another jurisdiction.

Interrogatories

Written questions sent by one party to another in a lawsuit, which must be answered in writing and under oath.

Discovery

A process of information gathering that takes place before a civil trial.

Amount in Controversy

The Amount in Controversy is the monetary value involved in a lawsuit that must be met or exceeded for a court to have jurisdiction.