The owner of Tastee Cookies needs to decide whether to lease a small, medium, or large new retail outlet. She estimates that monthly profits will vary with demand for her cookies as follows: $\begin{array}{|l|l|l|l|}
\hline\text {SIZE}\
\text {OF}&\text {DEMAND}\
\hline \text { OUTLET } & \text { LOW } && \text { HIGH } \
\hline \text { Small } & \$ 1,000 && 1,000 \
\hline \text { Medium } & 500 && 2,500 \
\hline \text { Large } & 0 && 3,000 \
\hline
\end{array}$ If she uses the maximax criterion, what size outlet will she decide to lease?
A) small
B) medium
C) large
D) either small or medium
E) either medium or large

Question

Quizplus · Accepted Answer

The maximax criterion chooses the alternative with the highest maximum payoff. In this case, the large outlet has the highest maximum payoff of $3,000, so the owner will decide to lease a large outlet.

The Owner of Tastee Cookies Needs to Decide Whether to Lease