The Construction Manager for ABC Construction Must Decide Whether to Build

question 16

Multiple Choice

The construction manager for ABC Construction must decide whether to build single family homes, apartments, or condominiums. He estimates annual profits (in $000) will vary with the population trend as follows:

If he uses Bayes' decision rule, which kind of dwellings will he decide to build?

• A) Single family
• B) Apartments
• C) Condos
• D) Either single family or apartments
• E) Either apartments or condos

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Definitions:

Economies of Scale

Competitive edge gained by firms through efficient production methods, leading to a reduction in the cost for each unit produced as the scale of production grows.

Natural Gas Pipeline

A system of pipes that transports natural gas from its source to the consumers or to a processing plant.

Diminishing Returns to Scale

A situation where, as more inputs are used, the incremental increase in output decreases.

Economies of Scale

Economies of scale refer to the cost advantages that enterprises obtain due to their scale of operation, with cost per unit of output decreasing with increasing scale.