The construction manager for Acme Construction, Inc., 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 the Laplace criterion, 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

Question

The construction manager for Acme Construction, Inc., 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 the Laplace criterion, 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

Quizplus · Accepted Answer

The Laplace criterion involves calculating the expected value and choosing the option with the highest expected value. The expected value for single-family homes is (0.4)(200)+(0.4)(300)+(0.2)(100)=220, for apartments it is (0.4)(150)+(0.3)(250)+(0.3)(50)=145, and for condominiums it is (0.3)(220)+(0.4)(150)+(0.3)(100)=150. Therefore, the construction manager should decide to build single-family homes, as they have the highest expected value.

The Construction Manager for Acme Construction, Inc