Thompson Lumber Company wants to decide if they want to expand their current product line by manufacturing a new product, backyard storage sheds. They decide their alternatives are to (1) construct a new large plant to manufacture storage sheds, (2) a small plant, or (3) no plant at all. To identify the possible outcomes, management created the payoff table, indicating profits below. Favorable Market Unfavorable Market Alternative ($) ($) Large Plant 200,000 -180,000 Small Plant 100,000 -20,000 Do nothing 0 0 What decision would you make if you applied the minmax regret rule?
Thompson Lumber Company wants to decide if they want to expand their current product line by manufacturing a new product, backyard storage sheds. They decide their alternatives are to (1) construct a new large plant to manufacture storage sheds, (2) a small plant, or (3) no plant at all. To identify the possible outcomes, management created the payoff table, indicating profits below. Favorable Market Unfavorable Market Alternative ($) ($) Large Plant 200,000 -180,000 Small Plant 100,000 -20,000 Do nothing 0 0 What decision would you make if you applied the minmax regret rule?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Thompson Lumber Company wants to decide if they want to expand their current product line by manufacturing a new product, backyard storage sheds. They decide their alternatives are to (1) construct a new large plant to manufacture storage sheds, (2) a small plant, or (3) no plant at all. To identify the possible outcomes, management created the payoff table, indicating profits below.
|
|
Favorable Market |
Unfavorable Market |
|
Alternative |
($) |
($) |
|
Large Plant |
200,000 |
-180,000 |
|
Small Plant |
100,000 |
-20,000 |
|
Do nothing |
0 |
0 |
What decision would you make if you applied the minmax regret rule?
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