The Operations Manager for a Local Bus Company Wants to Decide

question 85

Multiple Choice

The operations manager for a local bus company wants to decide whether he should purchase a small, medium, or large new bus for his company. He estimates that the annual profits (in $000) will vary depending upon whether passenger demand is low, medium, or high, as follows: $$\begin{array} { | l | c | c | c | } \hline \text { Bus } &&{ \text { DEMAND } } \\\hline & \text { LOW } & \text { MEDIUM } & \text { HIGH } \\\hline \text { Small } & 50 & 60 & 70 \\\hline \text { Medium } & 40 & 80 & 90 \\\hline \text { Large } & 20 & 50 & 120 \\\hline\end{array}$$
If he uses the Laplace criterion, which size bus will he decide to purchase?

• A) small
• B) medium
• C) large
• D) either small or medium
• E) either medium or large

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Definitions:

Wrongful Repudiation

The unjustified refusal to fulfill the terms of a contract, thereby breaching the agreement.

Present Values

A financial calculation that determines the current worth of a future sum of money or stream of cash flows, given a specified rate of return.

Market Rent

The prevailing rental rate for properties, typically of similar type and location, determined by the current market conditions.

Woodworking Equipment

Tools and machines used in the craft of making products from wood.