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 equal likelihood criterion would be to
A) make the large investment.
B) make the medium investment.
C) make the small investment.
D) choose increasing 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 equal likelihood criterion would be to
A) make the large investment. 
B) make the medium investment. 
C) make the small investment. 
D) choose increasing 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 equal likelihood criterion would be to
A) make the large investment. 
B) make the medium investment. 
C) make the small investment. 
D) choose increasing demand.

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