The operations manager for a local bus company wants to decide whether he should

Question

The operations manager for a local bus company wants to decide whether he should purchase a small or large new bus for his company. He estimates that the annual profits will vary depending upon whether passenger demand is low or high. The manager believes that there is about a 6 in 10 chance that demand will be high. Which of the following statements is true?

1- The probability that demand will be low is less than 20%

2- The manager must choose the level of passenger demand

3- Only the chance of low demand is needed to make this decision

4- Four profit figures are needed to make this decision

5- none of above

Explanation / Answer

1. The probablity that demand will be low will be 4/10 * 100 = 40%, hence the given statement is false.

2. Decision can't be made without taking in account both the demands, hence he can't choose one demand. Therefore given statement is false.

3. This statement is also false because of the same reason as above.

4. If we have four profit figures which will be calculated on both low and high demands then decision making will become clear. Hence this statement is TRUE.

The 4th statement is TRUE.

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