Question 1

________ is the difference between the payoff under perfect information and the payoff under risk.

Accepted Answer

Expected v

Question 2

What is the expected value of perfect information of the following decision table?

Accepted Answer

A) 0 
B) 20 
C) 50 
D) 150 
E) 200 
A) 0 
B) 20 
C) 50 
D) 150 
E) 200

Question 3

In terms of decision theory,an occurrence or situation over which the decision maker has no control is called a(n):

Accepted Answer

A) decision under uncertainty. 
B) decision tree. 
C) state of nature. 
D) alternative. 
E) EMV. 
A) decision under uncertainty. 
B) decision tree. 
C) state of nature. 
D) alternative. 
E) EMV.

Question 4

What decision criterion would be used by an optimistic decision maker solving a problem under conditions of uncertainty?

Accepted Answer

A) expected monetary value 
B) equally likely 
C) maximax 
D) maximin 
E) minimin 
A) expected monetary value 
B) equally likely 
C) maximax 
D) maximin 
E) minimin

Question 5

Define expected monetary value (EMV).

Accepted Answer

EMV is the expected value or m

Question 6

The first step,and a key element,in the decision-making process is to:

Accepted Answer

A) consult a specialist. 
B) clearly define the problem. 
C) develop objectives. 
D) monitor the results. 
E) select the best alternative. 
A) consult a specialist. 
B) clearly define the problem. 
C) develop objectives. 
D) monitor the results. 
E) select the best alternative.

Question 7

A local business owner is a bit uncertain of the demand forecast,and he is timidly approaching the capacity decision for a business he is about to open.Here's how he describes the decisions that confront him over the next two years.
"First,I have to choose between building a large plant initially and building a small one that has room to expand.Or I could rent now and decide whether to build next year.That one,too,could be the large version or the small.If I build small,then after one year,I can review how good business was,and decide whether to expand.If I build large,there is no further option to enlarge."
Do not concern yourself with probabilities or payoff values.Simply draw the tree that illustrates the manager's decision alternatives and the chance events that go along with them.Use standard symbols for decision tree construction,and label all parts of your diagram carefully.To simplify,assume that business in the first year,and in the second,can be only "good" or "bad."

Accepted Answer

The answer of A local business owner is a bit...

Question 8

A retailer is deciding how many units of a certain product to stock.The historical probability distribution of sales for this product is 0 units,0.2;1 unit,0.3;2 units,0.4,and 3 units,0.1.The product costs $8 per unit and sells for $25 per unit.What is the conditional value for the decision alternative "Stock 3" and state of nature "Sell 1"?

Accepted Answer

A) 1.4 units 
B) $1 profit 
C) $25 profit 
D) $-8 profit 
E) $23.80 profit 
A) 1.4 units 
B) $1 profit 
C) $25 profit 
D) $-8 profit 
E) $23.80 profit

Question 9

The expected value with perfect information is:

Accepted Answer

A) the maximum EMV for a set of alternatives. 
B) the same as the expected value of perfect information. 
C) the difference between the payoff under perfect information and the payoff under risk. 
D) the expected return obtained when the decision maker knows which state of nature is going to occur before the decision is made. 
E) obtained using conditional probabilities. 
A) the maximum EMV for a set of alternatives. 
B) the same as the expected value of perfect information. 
C) the difference between the payoff under perfect information and the payoff under risk. 
D) the expected return obtained when the decision maker knows which state of nature is going to occur before the decision is made. 
E) obtained using conditional probabilities.

Question 10

Which of the following is NOT considered a step in the decision-making process?

Accepted Answer

A) Clearly define the problem and the factors that influence it. 
B) Select the best alternative. 
C) Develop specific and measurable objectives. 
D) Evaluate each alternative solution based on its merits and drawbacks. 
E) Minimize costs whenever possible. 
A) Clearly define the problem and the factors that influence it. 
B) Select the best alternative. 
C) Develop specific and measurable objectives. 
D) Evaluate each alternative solution based on its merits and drawbacks. 
E) Minimize costs whenever possible.

Question 11

What is the expected value with perfect information of the following decision table?

Accepted Answer

A) 5,000 
B) 10,000 
C) 40,000 
D) 60,000 
E) 70,000 
A) 5,000 
B) 10,000 
C) 40,000 
D) 60,000 
E) 70,000

Question 12

A decision maker using the maximax criterion on the problem below would choose Alternative ________ because the maximum of the row maximums is ________.

Accepted Answer

A) A;60 
B) B;80 
C) C;70 
D) D;-100 
E) D;140 
A) A;60 
B) B;80 
C) C;70 
D) D;-100 
E) D;140

Question 13

A state of nature is an occurrence or a situation over which the decision maker has little or no control.

Accepted Answer

A) True 
 B)False

Question 14

What limitation(s)do decision trees overcome compared to decision tables?

Accepted Answer

Decision trees work

Question 15

A toy manufacturer has three different mechanisms that can be installed in a doll that it sells.The different mechanisms have three different setup costs (overheads)and variable costs and,therefore,the profit from the dolls is dependent on the volume of sales.The anticipated payoffs are as follows.
   a.What is the EMV of each decision alternative?
b.Which action should be selected?
c.What is the expected value with perfect information?
d.What is the expected value of perfect information?

Accepted Answer

(a)Wind-up = .25($325,000)+ .45($190,000

Question 16

A problem that involves a sequence of decisions:

Accepted Answer

A) cannot be analyzed with expected monetary value. 
B) can be better analyzed with a decision tree than by a decision table. 
C) must be analyzed in the same order that the decisions are made. 
D) cannot be analyzed with decision tree software. 
E) can only be analyzed using decision making under certainty. 
A) cannot be analyzed with expected monetary value. 
B) can be better analyzed with a decision tree than by a decision table. 
C) must be analyzed in the same order that the decisions are made. 
D) cannot be analyzed with decision tree software. 
E) can only be analyzed using decision making under certainty.

Question 17

What is the EMV for Option 1 in the following decision table?

Accepted Answer

A) 200 
B) 240 
C) 250 
D) 260 
E) 300 
A) 200 
B) 240 
C) 250 
D) 260 
E) 300

Question 18

The maximin criterion is pessimistic,while the maximax criterion is optimistic.

Accepted Answer

A) True 
 B)False

Question 19

A square node on a decision tree infers that:

Accepted Answer

A) the node splits into various states of nature,of which only one will occur. 
B) there are several alternatives available. 
C) the manager must choose an alternative. 
D) Both B and C 
E) A,B,and C 
A) the node splits into various states of nature,of which only one will occur. 
B) there are several alternatives available. 
C) the manager must choose an alternative. 
D) Both B and C 
E) A,B,and C

Question 20

The expected value of perfect information (EVPI)is the:

Accepted Answer

A) payoff for a decision made under perfect information. 
B) payoff under minimum risk. 
C) average expected payoff. 
D) difference between the payoff under perfect information and the payoff under risk. 
E) greater of EVwPI and Maximum EMV. 
A) payoff for a decision made under perfect information. 
B) payoff under minimum risk. 
C) average expected payoff. 
D) difference between the payoff under perfect information and the payoff under risk. 
E) greater of EVwPI and Maximum EMV.

Exam 22: Decision-Making Tools

________ is the difference between the payoff under perfect information and the payoff under risk.

What is the expected value of perfect information of the following decision table?

In terms of decision theory,an occurrence or situation over which the decision maker has no control is called a(n):

What decision criterion would be used by an optimistic decision maker solving a problem under conditions of uncertainty?

Define expected monetary value (EMV).

The first step,and a key element,in the decision-making process is to:

The expected value with perfect information is:

Which of the following is NOT considered a step in the decision-making process?

What is the expected value with perfect information of the following decision table?

A decision maker using the maximax criterion on the problem below would choose Alternative ________ because the maximum of the row maximums is ________.

A state of nature is an occurrence or a situation over which the decision maker has little or no control.

What limitation(s)do decision trees overcome compared to decision tables?

A problem that involves a sequence of decisions:

What is the EMV for Option 1 in the following decision table?

The maximin criterion is pessimistic,while the maximax criterion is optimistic.

A square node on a decision tree infers that:

The expected value of perfect information (EVPI)is the:

Operations and Productivity

Operations Strategy in a Global Environment

Project Management

Forecasting

Design of Goods and Services

Managing Quality

Process Strategy

Location Strategies

Layout Strategies

Human Resources,job Design,and Work Measurement

Supply Chain Management

Inventory Management

Aggregate Planning and Sop

Material Requirements Planning Mrpand Erp

Short-Term Scheduling

Jit,tps,and Lean Operations

Maintenance and Reliability

Sustainability in the Supply Chain

Statistical Process Control

Capacity and Constraint Management

Supply Chain Management Analytics

Linear Programming

Transportation Models

Waiting-Line Models

Learning Curves

Simulation

Filters

A decision maker using the maximax criterion on the problem below would choose Alternative because the maximum of the row maximums is .