Question

Suppose you run a simulation model several times with different order quantities. What can we infer...

Suppose you run a simulation model several times with different order quantities. What can we infer about the quantity that maximizes the output, the company’s profit?

A. This quantity is the optimal order quantity.

B. This quantity might be the optimal order quantity, but we also need to consider the company’s attitude toward risk.

C. This is not necessarily the optimal order quantity, because it may have produced the largest profit by luck.

D. We can’t infer anything.

Math   Statistics-And-Probability   
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Answer #1

Correct option:

B.   This quantity might be the optimal order quantity, but we also need to consider the company's attitude towards risk.

EXPLANATION:
Since the optimal order quantity is obtained by simulation and not by closed form solution, we cannot conclude categorically that this quantity is the optimal order quantity. But, we can just infer that this quantity may be the optimal order quantity. In addition, the optimal order quantity depeneds on the company's attitude towars risk.

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