The owner of Tastee Cookies needs to decide whether to lease a small, medium, or large new retail outlet. She estimates that monthly profits will vary with demand for her cookies as follows:
If she uses the maximax criterion, what size outlet will she decide to lease?
A) small
B) medium
C) large
D) either small or medium
E) either medium or large

Question

The owner of Tastee Cookies needs to decide whether to lease a small, medium, or large new retail outlet. She estimates that monthly profits will vary with demand for her cookies as follows: 
If she uses the maximax criterion, what size outlet will she decide to lease?
A) small 
B) medium 
C) large 
D) either small or medium 
E) either medium or large

Quizplus · Accepted Answer

The maximax criterion involves choosing the option that yields the highest possible payoff. Looking at the table, we can see that the highest possible profit is $80,000, which occurs when there is high demand for the cookies and the owner leases a large outlet. Therefore, the owner should choose to lease a large outlet according to the maximax criterion.

The Owner of Tastee Cookies Needs to Decide Whether to Lease