Question 1

It is sometimes said that "Those who gamble the most are the ones who can least afford to lose." These people gamble because

Accepted Answer

A)  the EMV is positive. 
B)  the EMV is negative. 
C)  the gambler has no family to consider if he/she dies. 
D)  there is utility other than monetary to consider. 
E)  None of the above 
A)  the EMV is positive. 
B)  the EMV is negative. 
C)  the gambler has no family to consider if he/she dies. 
D)  there is utility other than monetary to consider. 
E)  None of the above

Question 2

The following is an opportunity loss table.   What decision should be made based on the minimax regret criterion?

Accepted Answer

A)  Alternative 1 
B)  Alternative 2 
C)  Alternative 3 
D)  State of Nature A 
E)  Does not matter 
A)  Alternative 1 
B)  Alternative 2 
C)  Alternative 3 
D)  State of Nature A 
E)  Does not matter

Question 3

A market research survey is available for $10,000. Using a decision tree analysis, it is found that the expected monetary value with the survey is $75,000. The expected monetary value with no survey is $62,000. What is the expected value of sample information?

Accepted Answer

A)  -$7,000 
B)  $3,000 
C)  $7,000 
D)  $13,000 
E)  None of the above 
A)  -$7,000 
B)  $3,000 
C)  $7,000 
D)  $13,000 
E)  None of the above

Question 4

The optimistic decision criterion is the criterion of ________.

Accepted Answer

A)  maximax 
B)  maximin 
C)  realism 
D)  equally likely 
E)  minimax regret 
A)  maximax 
B)  maximin 
C)  realism 
D)  equally likely 
E)  minimax regret

Question 5

List the five major decision criteria used when making decisions under uncertainty.

Accepted Answer

(1) maximax (optimistic), (2)

Question 6

The nodes on decision trees represent either decisions or states of nature.

Accepted Answer

A) True 
 B)False

Question 7

Pessimistic decision makers tend to ________.

Accepted Answer

A)  magnify favorable outcomes 
B)  ignore bad outcomes 
C)  discount favorable outcomes 
D)  A and B 
E)  B and C 
A)  magnify favorable outcomes 
B)  ignore bad outcomes 
C)  discount favorable outcomes 
D)  A and B 
E)  B and C

Question 8

The following is a payoff table giving profits for various situations.   What decision would an optimist make?

Accepted Answer

A)  Alternative 1 
B)  Alternative 2 
C)  Alternative 3 
D)  Do Nothing 
E)  State of Nature A 
A)  Alternative 1 
B)  Alternative 2 
C)  Alternative 3 
D)  Do Nothing 
E)  State of Nature A

Question 9

The difference in decision making under risk and decision making under uncertainty is that under risk, we think we know the probabilities of the states of nature, while under uncertainty we do not know the probabilities of the states of nature.

Accepted Answer

A) True 
 B)False

Question 10

Utility values typically range from -1 to +1.

Accepted Answer

A) True 
 B)False

Question 11

Optimistic decision makers tend to discount favorable outcomes.

Accepted Answer

A) True 
 B)False

Question 12

Mark M. Upp has just been fired as the university bookstore manager for setting prices too low (only 20 percent above suggested retail). He is considering opening a competing bookstore near the campus, and he has begun an analysis of the situation. There are two possible sites under consideration. One is relatively small, while the other is large. If he opens at Site 1 and demand is good, he will generate a profit of $50,000. If demand is low, he will lose $10,000. If he opens at Site 2 and demand is high, he will generate a profit of $80,000, but he will lose $30,000 if demand is low. He also has the option of not opening either. He believes that there is a 50 percent chance that demand will be high. Mark can purchase a market research study. The probability of a good demand given a favorable study is 0.8. The probability of a good demand given an unfavorable study is 0.1. There is a 60 percent chance that the study will be favorable. Should Mark use the study? Why? What is the maximum amount Mark should be willing to pay for this study? What is the maximum amount he should pay for any study?

Accepted Answer

Yes, he should use the study. His EMV wi

Question 13

Expected monetary value (EMV) is the average or expected monetary outcome of a decision if it can be repeated a large number of times.

Accepted Answer

A) True 
 B)False

Question 14

The decision theory processes of maximizing expected monetary value (EMV) and minimizing expected opportunity loss (EOL) should lead us to choose the same alternatives.

Accepted Answer

A) True 
 B)False

Question 15

Briefly describe decision making under certainty.

Accepted Answer

Decision makers know

Question 16

David N. Goliath is planning to open a sporting goods store. However, the initial investment is $120,000. He currently has this money in a certificate of deposit earning 10 percent. He may leave it there if he decides not to open the store. If he opens the store and it is successful he will generate a profit of $50,000. If it is not successful, he will lose $90,000. What would the probability of a successful store have to be for David to prefer this to investing in a CD?

Accepted Answer

p(50,000) - (1-p)(90

Question 17

Briefly describe decision making under risk.

Accepted Answer

There are several possible out

Question 18

A pessimistic decision making criterion is

Accepted Answer

A)  maximax. 
B)  equally likely. 
C)  maximin. 
D)  decision making under certainty. 
E)  minimax regret. 
A)  maximax. 
B)  equally likely. 
C)  maximin. 
D)  decision making under certainty. 
E)  minimax regret.

Question 19

Describe the structure of a payoff table.

Accepted Answer

All of the alternatives are li

Question 20

In Bayesian analysis, conditional probabilities are also known as which of the following?

Accepted Answer

A)  anterior probabilities 
B)  posterior probabilities 
C)  prior probabilities 
D)  marginal probabilities 
E)  joint probabilities 
A)  anterior probabilities 
B)  posterior probabilities 
C)  prior probabilities 
D)  marginal probabilities 
E)  joint probabilities

It is sometimes said that "Those who gamble the most are the ones who can least afford to lose." These people gamble because

The following is an opportunity loss table. What decision should be made based on the minimax regret criterion?

A market research survey is available for $10,000. Using a decision tree analysis, it is found that the expected monetary value with the survey is $75,000. The expected monetary value with no survey is $62,000. What is the expected value of sample information?

The optimistic decision criterion is the criterion of ________.

List the five major decision criteria used when making decisions under uncertainty.

The nodes on decision trees represent either decisions or states of nature.

Pessimistic decision makers tend to ________.

The following is a payoff table giving profits for various situations. What decision would an optimist make?

The difference in decision making under risk and decision making under uncertainty is that under risk, we think we know the probabilities of the states of nature, while under uncertainty we do not know the probabilities of the states of nature.

Utility values typically range from -1 to +1.

Optimistic decision makers tend to discount favorable outcomes.

Expected monetary value (EMV) is the average or expected monetary outcome of a decision if it can be repeated a large number of times.

The decision theory processes of maximizing expected monetary value (EMV) and minimizing expected opportunity loss (EOL) should lead us to choose the same alternatives.

Briefly describe decision making under certainty.

Briefly describe decision making under risk.

A pessimistic decision making criterion is

Describe the structure of a payoff table.

In Bayesian analysis, conditional probabilities are also known as which of the following?

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

It is sometimes said that "Those who gamble the most are the ones who can least afford to lose." These people gamble because

The following is an opportunity loss table. What decision should be made based on the minimax regret criterion?

A market research survey is available for $10,000. Using a decision tree analysis, it is found that the expected monetary value with the survey is $75,000. The expected monetary value with no survey is $62,000. What is the expected value of sample information?

The optimistic decision criterion is the criterion of ________.

List the five major decision criteria used when making decisions under uncertainty.

The nodes on decision trees represent either decisions or states of nature.

Pessimistic decision makers tend to ________.

The following is a payoff table giving profits for various situations. What decision would an optimist make?

The difference in decision making under risk and decision making under uncertainty is that under risk, we think we know the probabilities of the states of nature, while under uncertainty we do not know the probabilities of the states of nature.

Utility values typically range from -1 to +1.

Optimistic decision makers tend to discount favorable outcomes.

Expected monetary value (EMV) is the average or expected monetary outcome of a decision if it can be repeated a large number of times.

The decision theory processes of maximizing expected monetary value (EMV) and minimizing expected opportunity loss (EOL) should lead us to choose the same alternatives.

Briefly describe decision making under certainty.

Briefly describe decision making under risk.

A pessimistic decision making criterion is

Describe the structure of a payoff table.

In Bayesian analysis, conditional probabilities are also known as which of the following?

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