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

question 30

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

---

Definitions:

Inventory Management

The practice of overseeing and controlling the ordering, storage, and use of components that a company uses in the production of the items it sells, as well as the management of finished products available for sale.

Average Total Assets

A financial metric calculated by averaging a company's total assets at the beginning and end of an accounting period, used to evaluate assets' efficiency.

Return Ratio

A financial metric indicating the profitability or effectiveness of an investment, often expressed as a percentage.

Denominator

The bottom number in a fraction that shows the total number of equal parts the whole is divided into.