Refer to the Following:
a Firm Is Considering the Decision $\text { The economy }$

question 46

Multiple Choice

Refer to the following:
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.
$\text { The economy }$
$\begin{array}{lccc} & \text { expands } & \text { contracts } & \text { unchanged } \\\hline \text { no new plants } & \$ 20 \text { million } & -\$ 3 \text { million } & \$ 4 \text { million } \\1 \text { new plant } & \$ 30 \text { million } & -\$ 6 \text { million } & \$ 6 \text { million } \\2 \text { new plants } & \$ 40 \text { million } & -\$ 12 \text { million } & \$ 8 \text { million }\end{array}$
-What decision would be made using the maximin rule?

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

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Definitions:

Challenging Assumptions

The act of questioning and critically evaluating the underlying premises on which beliefs and decisions are based.

Accepting Disposition

Describes a personality trait characterized by openness, tolerance, and a readiness to embrace experiences, perspectives, and changes.

Accurate Recollections

The ability to remember past events precisely as they happened.

Anatomically Correct Dolls

Dolls designed with features that accurately represent human genitalia, used in child development studies and forensic investigations.