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

question 153

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 Laplace 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:

Tax Rate

The tax imposition rate on the financial gains of individuals and corporations.

Machinery

Tools, equipment, and devices that perform various tasks in the production process, often indicating the fixed assets used in manufacturing or production.

Equipment

Tangible items purchased for use in the production or supply of goods and services, not intended for sale as part of regular operations.

Depreciated

The reduction in the value of an asset over time, often due to wear and tear or obsolescence.