Question 1

Briefly describe decision tree analysis.

Accepted Answer

define the problem, draw the tree, assign the probabilities to the states of nature, estimate payoffs for each alternative, compute EMV

Question 2

How are decision tables organized?

Accepted Answer

A)  alternatives down the left, states of nature on top, payoffs inside 
B)  states of nature down the left, alternatives on top, payoffs inside 
C)  alternatives down the left, payoffs on top, states of nature inside 
D)  payoffs down the left, alternatives on top, states of nature inside 
E)  states of nature down the left, payoffs on top, alternatives inside 
A)  alternatives down the left, states of nature on top, payoffs inside 
B)  states of nature down the left, alternatives on top, payoffs inside 
C)  alternatives down the left, payoffs on top, states of nature inside 
D)  payoffs down the left, alternatives on top, states of nature inside 
E)  states of nature down the left, payoffs on top, alternatives inside A

Question 3

In a decision table, all of the alternatives are listed down the left side of the table, while all of the possible outcomes or states of nature are listed across the top.

Accepted Answer

A) True 
 B)False  True

Question 4

What is the range of the Hurwicz criterion coefficient of realism α?

Accepted Answer

A)  1 to 100 
B)  1 to 10 
C)  0 to 10 
D)  0 to 1 
E)  −1 to 1 
A)  1 to 100 
B)  1 to 10 
C)  0 to 10 
D)  0 to 1 
E)  −1 to 1

Question 5

The following is a payoff table giving profits for various situations.   The probabilities for states of nature A, B, and C are 0.3, 0.5, and 0.2, respectively. If a person selected Alternative 1, what would the expected profit be?

Accepted Answer

A)  120 
B)  133.33 
C)  126 
D)  180 
E)  None of the above 
A)  120 
B)  133.33 
C)  126 
D)  180 
E)  None of the above

Question 6

A concessionaire for the local ballpark has developed a table of conditional values for the various alternatives (stocking decision) and states of nature (size of crowd).   If the probabilities associated with the states of nature are 0.30 for a large crowd, 0.50 for an average crowd, and 0.20 for a small crowd, determine:
(a) the alternative that provides the greatest expected monetary value (EMV)
(b) the expected value of perfect information (EVPI)

Accepted Answer

(a) For large invent

Question 7

Describe the utility curve of a risk avoider.

Accepted Answer

utility increasing a

Question 8

The equally likely decision criterion is also called the Laplace criterion.

Accepted Answer

A) True 
 B)False

Question 9

The expected value of sample information (EVSI) can be used to

Accepted Answer

A)  establish a maximum amount to spend on additional information. 
B)  calculate conditional probabilities. 
C)  establish risk avoidance. 
D)  provide points on a utility curve. 
E)  None of the above 
A)  establish a maximum amount to spend on additional information. 
B)  calculate conditional probabilities. 
C)  establish risk avoidance. 
D)  provide points on a utility curve. 
E)  None of the above

Question 10

In the construction of decision trees, which of the following shapes represents a decision node?

Accepted Answer

A)  square 
B)  circle 
C)  diamond 
D)  triangle 
E)  None of the above 
A)  square 
B)  circle 
C)  diamond 
D)  triangle 
E)  None of the above

Question 11

A utility curve that shows utility increasing at a decreasing rate as the monetary value increases represents the utility curve of a risk seeker.

Accepted Answer

A) True 
 B)False

Question 12

Nick has plans to open some pizza restaurants, but he is not sure how many to open. He has prepared a payoff table to help analyze the situation.   As Nick does not know how his product will be received, he assumes that all three states of nature are equally likely to occur. If he uses the equally likely criterion, what decision would he make?

Accepted Answer

A)  Open 1 
B)  Open 2 
C)  Good market 
D)  Fair market 
E)  Do nothing 
A)  Open 1 
B)  Open 2 
C)  Good market 
D)  Fair market 
E)  Do nothing

Question 13

The ABC Co. is considering a new consumer product. They believe that the XYZ Co. may come out with a competing product. If ABC adds an assembly line for the product and XYZ does not follow with a competitive product, their expected profit is $40,000; if they add an assembly line and XYZ does follow, they still expect a $10,000 profit. If ABC adds a new plant addition and XYZ does not produce a competitive product, they expect a profit of $600,000; if XYZ does compete for this market, ABC expects a loss of $100,000. For what value of probability that XYZ will offer a competing product will ABC be indifferent between the alternatives?

Accepted Answer

Let X = probability XYZ offers a competi

Question 14

Decision trees are particularly useful when

Accepted Answer

A)  perfect information is available. 
B)  formulating a conditional values table. 
C)  the opportunity loss table is available. 
D)  a sequence of decisions must be made. 
E)  all possible outcomes and alternatives are not known. 
A)  perfect information is available. 
B)  formulating a conditional values table. 
C)  the opportunity loss table is available. 
D)  a sequence of decisions must be made. 
E)  all possible outcomes and alternatives are not known.

Question 15

The decision maker can control states of nature.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is true about the expected value of perfect information?

Accepted Answer

A)  It is the amount you would pay for any sample study. 
B)  It is calculated as EMV minus EOL. 
C)  It is calculated as expected value with perfect information minus maximum EMV. 
D)  It is the amount charged for marketing research. 
E)  None of the above 
A)  It is the amount you would pay for any sample study. 
B)  It is calculated as EMV minus EOL. 
C)  It is calculated as expected value with perfect information minus maximum EMV. 
D)  It is the amount charged for marketing research. 
E)  None of the above

Question 17

Another name for a decision table is a ________.

Accepted Answer

A)  payment table 
B)  payout table 
C)  payoff table 
D)  pay-up table 
E)  decision tree 
A)  payment table 
B)  payout table 
C)  payoff table 
D)  pay-up table 
E)  decision tree

Question 18

A market research survey is available for $10,000. Using a decision tree analysis, it is found that the expected monetary value with no survey is $62,000. If the expected value of sample information is -$7,000, what is the expected monetary value with the survey?

Accepted Answer

A)  $45,000 
B)  $62,000 
C)  -$17,000 
D)  $55,000 
E)  None of the above 
A)  $45,000 
B)  $62,000 
C)  -$17,000 
D)  $55,000 
E)  None of the above

Question 19

The assignment of a utility value of 1 to an alternative implies that alternative is preferred to all others.

Accepted Answer

A) True 
 B)False

Question 20

Utilization of Bayes' theorem requires the use of all but

Accepted Answer

A)  prior probabilities. 
B)  marginal probabilities. 
C)  conditional probabilities. 
D)  posterior probabilities. 
E)  expected monetary values (EMV). 
A)  prior probabilities. 
B)  marginal probabilities. 
C)  conditional probabilities. 
D)  posterior probabilities. 
E)  expected monetary values (EMV).

Briefly describe decision tree analysis.

How are decision tables organized?

In a decision table, all of the alternatives are listed down the left side of the table, while all of the possible outcomes or states of nature are listed across the top.

What is the range of the Hurwicz criterion coefficient of realism α?

The following is a payoff table giving profits for various situations. The probabilities for states of nature A, B, and C are 0.3, 0.5, and 0.2, respectively. If a person selected Alternative 1, what would the expected profit be?

Describe the utility curve of a risk avoider.

The equally likely decision criterion is also called the Laplace criterion.

The expected value of sample information (EVSI) can be used to

In the construction of decision trees, which of the following shapes represents a decision node?

A utility curve that shows utility increasing at a decreasing rate as the monetary value increases represents the utility curve of a risk seeker.

Decision trees are particularly useful when

The decision maker can control states of nature.

Which of the following is true about the expected value of perfect information?

Another name for a decision table is a ________.

A market research survey is available for $10,000. Using a decision tree analysis, it is found that the expected monetary value with no survey is $62,000. If the expected value of sample information is -$7,000, what is the expected monetary value with the survey?

The assignment of a utility value of 1 to an alternative implies that alternative is preferred to all others.

Utilization of Bayes' theorem requires the use of all but

Introduction to Quantitative Analysis

Probability Concepts and Applications

Regression Models

Forecasting

Inventory Control Models

Linear Programming Models: Graphical and Computer Methods

Linear Programming Applications

Transportation and Assignment Models

Integer Programming, Goal Programming, and Nonlinear Programming

Network Models

Project Management

Waiting Lines and Queuing Theory Models

Simulation Modeling

Markov Analysis

Statistical Quality Control

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Exam 3: Decision Analysis

Briefly describe decision tree analysis.

How are decision tables organized?

In a decision table, all of the alternatives are listed down the left side of the table, while all of the possible outcomes or states of nature are listed across the top.

What is the range of the Hurwicz criterion coefficient of realism α?

The following is a payoff table giving profits for various situations. The probabilities for states of nature A, B, and C are 0.3, 0.5, and 0.2, respectively. If a person selected Alternative 1, what would the expected profit be?

Describe the utility curve of a risk avoider.

The equally likely decision criterion is also called the Laplace criterion.

The expected value of sample information (EVSI) can be used to

In the construction of decision trees, which of the following shapes represents a decision node?

A utility curve that shows utility increasing at a decreasing rate as the monetary value increases represents the utility curve of a risk seeker.

Decision trees are particularly useful when

The decision maker can control states of nature.

Which of the following is true about the expected value of perfect information?

Another name for a decision table is a ________.

A market research survey is available for $10,000. Using a decision tree analysis, it is found that the expected monetary value with no survey is $62,000. If the expected value of sample information is -$7,000, what is the expected monetary value with the survey?

The assignment of a utility value of 1 to an alternative implies that alternative is preferred to all others.

Utilization of Bayes' theorem requires the use of all but

Introduction to Quantitative Analysis

Probability Concepts and Applications

Regression Models

Forecasting

Inventory Control Models

Linear Programming Models: Graphical and Computer Methods

Linear Programming Applications

Transportation and Assignment Models

Integer Programming, Goal Programming, and Nonlinear Programming

Network Models

Project Management

Waiting Lines and Queuing Theory Models

Simulation Modeling

Markov Analysis

Statistical Quality Control

Filters