The Operations Manager for a Well-Drilling Company Must Recommend Whether

question 14

Multiple Choice

The operations manager for a well-drilling company must recommend whether to build a new facility, expand his existing one, or do nothing. He estimates that long-run profits (in $000) will vary with the amount of precipitation (rainfall) as follows:

If he uses the minimax regret criterion, which alternative will he decide to select?

• A)do nothing
• B)expand
• C)build new
• D)either do nothing or expand
• E)either expand or build new

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Definitions:

Parameter

A numerical characteristic of a population, such as a population mean m, a population standard deviation s, a population proportion p, and so on.

Adjusted Multiple Coefficient

A measure in statistics used to determine the goodness of fit of a model, adjusted for the number of predictors in the model.

SSE

Sum of Squared Errors, a measure used in statistical data analysis to represent the discrepancy between the data and an estimation model.

Coefficient

A numerical or constant quantity placed before and multiplying the variable in an algebraic expression (e.g., the 4 in 4x).