The local operations manager for the Internal Revenue Service must decide whether to hire one, two, or three temporary tax examiners for the upcoming tax season. She estimates that net revenues (in thousands of dollars) will vary with how well taxpayers comply with the new tax code just passed by Congress, as follows: If she uses the maximin criterion, how many new examiners will she decide to hire?
A) one
B) two
C) three
D) either one or two
E) either two or three

Question

The local operations manager for the Internal Revenue Service must decide whether to hire one, two, or three temporary tax examiners for the upcoming tax season. She estimates that net revenues (in thousands of dollars) will vary with how well taxpayers comply with the new tax code just passed by Congress, as follows:  If she uses the maximin criterion, how many new examiners will she decide to hire?
A) one 
B) two 
C) three 
D) either one or two 
E) either two or three

Quizplus · Accepted Answer

The maximin criterion involves selecting the option with the highest minimum possible outcome. In this case, that would mean selecting the option with the highest net revenue (in thousands of dollars) given the worst compliance scenario (i.e. 50% compliance).

If one temporary tax examiner is hired, the net revenue would be $30. If two are hired, the net revenue would be $20. If three are hired, the net revenue would be $10.

Therefore, the highest minimum possible net revenue is $30 by hiring one temporary tax examiner. Thus, the local operations manager should decide to hire one new examiner using the maximin criterion.

The Local Operations Manager for the Internal Revenue Service Must