The new owner of a beauty shop is trying to decide whether to hire one, two, or three beauticians. She estimates that profits next year (in thousands of dollars) will vary with demand for her services, and she has estimated demand in three categories, low, medium, and high.
If she uses the maximax criterion, how many beauticians will she decide to hire?
A) one
B) two
C) three
D) either one or two
E) either two or three

Question

The new owner of a beauty shop is trying to decide whether to hire one, two, or three beauticians. She estimates that profits next year (in thousands of dollars) will vary with demand for her services, and she has estimated demand in three categories, low, medium, and high.
If she uses the maximax criterion, how many beauticians will she decide to hire? 
A) one 
B) two 
C) three 
D) either one or two 
E) either two or three

Quizplus · Accepted Answer

The maximax criterion involves choosing the alternative that has the highest possible payoff. In this case, the payoff is the profit, which will vary with demand. Since we do not have any specific values for demand or profit, we cannot calculate the actual payoff for each alternative. However, we can use the information given to make an educated guess.

If the owner hires only one beautician, she may not be able to handle high demand, and may lose out on potential profits. On the other hand, hiring three beauticians may be too much for low demand, leading to unnecessary expenses.

Therefore, the best choice using the maximax criterion would be to hire the maximum number of beauticians, which is three. This ensures that the shop can handle high demand and potentially maximize profits.

The New Owner of a Beauty Shop Is Trying to Decide