Question

A manager of a holiday specialty store must determine how many temporary workers to hire for the holiday season. Estimated revenues (thousands of dollars) are based on poor, good, and excellent economic conditions and whether one, two or three workers are hired as follows:

	Economic	Condition
Workers Hired	Excellent	Good	Poor
One	50	50	50
Two	100	60	20
Three	150	70	-10

22. If a Maximax strategy is used, how many workers should be hired?

a. one

b. two

c. three

d. either one or two

e. either two or three

23. If a Maximin strategy is used, how many workers should be hired?

a. one

b. two

c. three

d. either one or two

e. either two or three

24. If an Equally Likely strategy is used, how many workers should be hired?

a. one

b. two

c. three

d. either one or two

e. either two or three

25. If it’s determined that there’s a 20% chance of excellent, 30% chance of good, and 50% chance of poor economic conditions, what’s the expected value of alternative #2--hiring two workers?

a. $16000

b. $26000

c. $46000

d. $48000

e. $50000

26. A Risk Taker (decision maker) would choose the project with

       a. The highest Coefficient of Variation

       b. The highest Expected Value

       c. The highest Standard Deviation

      d. The lowest Coefficient of Variation

      e. The lowest Standard Deviation

27. A Risk Averse (decision maker) would choose the project with

       a. The highest Coefficient of Variation

       b. The highest Expected Value

       c. The highest Standard Deviation

      d. The lowest Coefficient of Variation

      e. The lowest Standard Deviation

28. A Risk Neutral (decision maker) would choose the project with

       a. The highest Coefficient of Variation

       b. The highest Expected Value

       c. The highest Standard Deviation

      d. The lowest Coefficient of Variation

      e. The lowest Standard Deviation

Answer 1

22.The correct answer is option c.three

Max payoff of decision One worker=50   

Max payoff of decision Two workers=100

Max payoff of decision Three workers=150

Maximax =Maximum of (maximum pay off of alternatives One worker.Two workers,Three workers)

=Maximum of (50,100,150)

=$ 150 thousands

The appropriate decision will be to hire 3 workers.

23.The correct answer is option a.one

Min payoff of decision One worker=50   

Min payoff of decision Two workers=20

Min payoff of decision Three workers=-10

Maximin =Maximum of (minimum pay off of alternatives One worker.Two workers,Three workers)

=Maximum of (50,20,-10)

=$ 50 thousands

The appropriate decision will be to hire one worker.

24.The correct answer is option c.three

In equally likely criterion ,probability of all the three states of nature is same and equal to 1/3

Expected value of alternative one worker=1/3(50+50+50)=50 =$ 50 thousands

Expected value of alternative two workers=1/3(100+60+20)=180/3 =$ 60 thousands

Expected value of alternative three workers=1/3(150+70-10)=210/3 =$ 70 thousands

The appropriate decision will be to hire 3 workers.

25.The correct answer is option d.$ 48000

Expected value of alternative 2 -hiring two workers =0.2*100+0.3*60+0.5*20=$ 48 thousands

26.The correct answer is option b.The highest expected value