Fairco, a family business, is considering making an investment in its manufacturing operation. Three decisions are under consideration: (1) a large investment; (2) a medium investment; and (3) a small investment. The business believes that there are three possible future outcomes for its product: (1) increasing demand; (2) stable demand; and (3) decreasing demand. The following payoff table describes the decision situation. The best decision for Fairco using the Hurwicz criterion with a coefficient of optimism equal to 0.80 would be to
A) make the large investment.
B) make the medium investment.
C) make the small investment.
D) choose stable demand.

Question

Fairco, a family business, is considering making an investment in its manufacturing operation. Three decisions are under consideration: (1) a large investment; (2) a medium investment; and (3) a small investment. The business believes that there are three possible future outcomes for its product: (1) increasing demand; (2) stable demand; and (3) decreasing demand. The following payoff table describes the decision situation.  The best decision for Fairco using the Hurwicz criterion with a coefficient of optimism equal to 0.80 would be to
A) make the large investment. 
B) make the medium investment. 
C) make the small investment. 
D) choose stable demand.

Quizplus · Accepted Answer

The Answer of Fairco, a family business, is considering making an investment in its manufacturing operation. Three decisions are under consideration: (1) a large investment; (2) a medium investment; and (3) a small investment. The business believes that there are three possible future outcomes for its product: (1) increasing demand; (2) stable demand; and (3) decreasing demand. The following payoff table describes the decision situation.  The best decision for Fairco using the Hurwicz criterion with a coefficient of optimism equal to 0.80 would be to
A) make the large investment. 
B) make the medium investment. 
C) make the small investment. 
D) choose stable demand.

Fairco, a Family Business, Is Considering Making an Investment in Its