The Owner of Tastee Cookies Needs to Decide Whether to Lease

question 118

Multiple Choice

The owner of Tastee Cookies needs to decide whether to lease a small, medium, or large new retail outlet. She estimates that monthly profits will vary with demand for her cookies as follows:

For what range of probability that demand will be high, will she decide to lease the small facility?

• A)0-0.25
• B)0-0.33
• C)0.25-0.5
• D)0.33-1
• E)0.5-1

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Definitions:

Framing

The way information is presented so as to emphasize either a potential gain or a potential loss as the outcome.

Representativeness Heuristic

is a cognitive shortcut where the likelihood of an object belonging to a category is assessed based on its similarity to a typical case from that category.

Heuristics

Mental shortcuts or rules of thumb that ease the cognitive load of making a decision, often leading to approximation or educated guesses.

Algorithms

Step-by-step procedures or formulas for solving problems or completing tasks.