40IIUse the following information to answer multiple-choice Questions 1 to 10.An engineer develops a new product. Having made the product, he/she has threechoices. He/she can either manufacture the product or allow someone else to make itand be paid on a royalty basis, or alternatively, he/she can sell the rights to receive alump sum.I.The profit that can be expected depends on the level of sales with the correspondingprobabilities, shown in the table QI below, in thousands of £'s.Low Sales.High Sales.(Probability-0.2)Medium Sales.(Probability-D0.3)Manufacture09 108Take RoyaltiesSell all rights0009Table QI1. Using the Maximax decision criterion, the best decision is:a) Manufactureb) Take Royaltiesc) Sell all rightsd) Manufacture, because it produces the highest average profit among the three options2. Using the Maximin decision criterion, the best decision is:a) Manufactureb) Take Royaltiesc) Sell all rightsd) Sell all rights, because its lowest profit is the highest amongst the three options3. Using the Minimax decision criterion, the best decision is:a) Manufactureb) Take Royaltiesc) Sell all rightsd) Mail Order, because it has the highest opportunity loss4. Using the Hurwics criterion and alpha equal to 0.6, the best decision is:a) Manufactureb) Take Royaltiesc) Sell all rightsd) Mail Order, because it produces the highest average profit among the three options5. Using Maximise Expected Monetary Value (EMV) criterion, the best decision is:a) Manufactureb) Take Royaltiesc) Sell all rightsd) Any one of the three optionse here to search

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the following information to answer multiple-choice Qu engineer develops a new product. Having made the pre res. He/she can either manufacture the product or allow s be paid on a royalty basis, or alternatively, he/she can sel O sum. profit that can be expected depends on the level of sales babilities, shown in the table QI below, in thousands of £'s. High Sales. (Probability-0.2) Medium Sales. Manufacture 09 1 08 Take Royalties Sell all rights 09 Table QI g the Maximax decision criterion, the best decision is: Manufacture Take Royalties Sell all rights Manufacture, because it produces the highest average profit am ng the Maximin decision criterion, the best decision is: Manufacture Take Royalties Sell all rights Sell all rights, because its lowest profit is the highest amongst ng the Minimax decision criterion, the best decision is: Manufacture Take Royalties Sell all rights Mail Order, because it has the highest opportunity loss ing the Hurwics criterion and alpha equal to 0.6, the best decision Manufacture Take Royalties Sell all rights O Mail Order, because it produces the ghest average profit amor sing Maximise Expected Monetary Value (EMV) criterion, the best O Manufacture -) Take Royalties =) Sell all rights 3) Any one of the three options

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter9: Decision Making Under Uncertainty

Section: Chapter Questions

Problem 37P