GBA440 Midterm Exam New (100% answer) /GBA440 Midterm Exam New (100% answer)

  
Question
Question 1. A plant manager is considering buying additional stamping machines to accommodate increasing demand. The alternatives are to buy 1 machine, 2 machines, or 3 machines. The profits realized under each alternative are a function of whether their bid for a recent defense contract is accepted or not. The payoff table below illustrates the profits realized (in $000’s) based on the different scenarios faced by the manager.
  
Alternative

Bid Accepted

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Bid Rejected
 
Buy 1 machine

$10

$5
 
Buy 2 machine

$30

$4
 
Buy 3 machine

$40

$2
Using the information above, which alternative should be chosen based on the maximax criterion?
Buy 1 machine
Buy 2 machines
Buy 3 machines
Question 2. A plant manager is considering buying additional stamping machines to accommodate increasing demand. The alternatives are to buy 1 machine, 2 machines, or 3 machines. The profits realized under each alternative are a function of whether their bid for a recent defense contract is accepted or not. The payoff table below illustrates the profits realized (in $000’s) based on the different scenarios faced by the manager.

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