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

question 11

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: $$\begin{array} { | l | l | l | l | } \hline { \text { ALTERNATIVE } } & { \text { PRECIPITATION } } \\\hline& \text { LOW } & \text { NORMAL } & \text { HIGH } \\\hline \text { Do Nothing } & - 100 & 100 & 300 \\\hline \text { Expand } & 350 & 500 & 200 \\\hline \text { Build New } & 750 & 300 & 0 \\\hline\end{array}$$ If he uses the maximax 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:

Confederate States

The Confederate States of America was a collection of 11 southern states that seceded from the United States in 1860-1861, leading to the American Civil War.

Economic Independence

The state of having sufficient personal wealth to live, without needing to work actively for basic necessities.

Supreme Court

The highest judicial court in a country or state, which has the ultimate authority to adjudicate in legal disputes and interpret laws.

Reconstruction

The period after the Civil War in the United States when the southern states were reorganized and reintegrated into the Union.