A Firm Is Considering the Decision of Investing in New $\quad$

Multiple Choice

A firm is considering the decision of investing in new plants.The following is the profit payoff matrix under three conditions: it does not expand,it builds two new plants,or it builds one new plant.Three possible states of nature can exist--no change in the economy,the economy contracts and the economy grows.The firm has no idea of the probability of each state. $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text { The econdmy }$
$\begin{array}{c}\begin{array}{lll}\\\\\text { no new plants}\\\text { 1 new plant}\\\text { 2 new plants}\end{array}\begin{array}{c}\text { expands } \\\hline \$ 20 \text { million } \\\$ 30 \text { million } \\\$ 40 \text { million }\end{array}\begin{array}{l}\text { contracts } \\\hline-\$ 3 \text { million } \\-\$ 6 \text { million } \\-\$ 12 \text { million }\end{array}\begin{array}{c}\text { unchanged}\\\hline \text { \$ 4 million}\\\text { \$ 6 million}\\\text { \$ 8 million}\end{array}\end{array}$
What decision would be made using the maximax rule?

A) no new plants
B) one new plant
C) two new plants
D) not enough information to tell