Question

Kenneth Brown is the principal owner of Brown Oil, Inc. After quitting his university teaching job, Ken has been able to increase his annual salary by a factor of over 100. At the present time, Ken is forced to consider purchasing some more equipment for Brown Oil because of competition. His alternatives are shown in the following table:
FAVORABLE UNFAVORABLE
MARKET MARKET
EQUIPMENT ($) ($)
Sub 100 300,000

Answer 1

Answer:

Multiple Answers

Step-by-step explanation:

You forgot to put all the question, I attached it to the answer.

The questions we need to response are:

a)What type of decision is Ken facing?

There are three types of decision in probability. This are:

Risky that cover when the event is known and you know the chances of success.

Of uncertainty that cover for a known event but you dont know the  possibilities of success.

Of ignorance that cover a unknown event, with unknown possibilities of succes.

So the decision Kenneth is facing is of uncertainty.

(b)What decision criterion should he use?

The criterion decision he should take would be Maximax.

This states that you should select the option that have the maximum gain.

(c)What alternative is best? The best option should be sub 100 because of the decision criterion we decided to use. Sub 100 has the maximum gain.