A company is expanding its production capacity.The decision will depend upon whether the increase in demand is low, medium or high.The company's choices for expansion are small, medium, large or very large.The following table provides an estimate of profits over the next two years.
a.Which decision variable would be picked using maximax?
b.Which decision variable would be picked using maximin?
c.Which decision variable would be picked using minimax regrets criteria?
d.Suppose the decision-maker assigns the probability of low-demand as 0.2, medium-demand as 0.5 and high-demand as 0.3.Which decision variable would be picked using the expected value criterion?
Definitions:
Batholith
A large mass of intrusive igneous rock, often granitic, that has solidified deep in the Earth's crust.
Decompression Melting
A geologic process where melting occurs due to a decrease in pressure as rock rises closer to the surface, without a change in temperature.
Subducting Plate
The tectonic plate that is being pushed downward into the mantle beneath another plate at a convergent boundary.
Igneous Rocks
Rocks formed by the cooling and solidification of magma or lava.
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