ABC operates a factory in the United Kingdom.Because the company's existing factory doesn't have the capacity to meet the future demands,it is considering various options.Consider the payoff matrix that shows the payoff for each combination of decision and state of nature.Determine the best alternative,given that the demand will be low.
A)Expand current facility.
B)Build small factory.
C)Build large factory.
D)Determine a new alternative.

Question

ABC operates a factory in the United Kingdom.Because the company's existing factory doesn't have the capacity to meet the future demands,it is considering various options.Consider the payoff matrix that shows the payoff for each combination of decision and state of nature.Determine the best alternative,given that the demand will be low.  
A)Expand current facility. 
B)Build small factory. 
C)Build large factory. 
D)Determine a new alternative.

Quizplus · Accepted Answer

When demand is low, the best option is to Expand current facility as it has the highest payoff of \$4 million compared to the other options. Building a small factory gives a payoff of \$3 million which is \$1 million less than expanding the current facility. Building a large factory has a negative payoff of \$4 million which is the worst option when demand is low. Therefore, the best alternative is to expand the current facility.

ABC Operates a Factory in the United Kingdom