Question 1

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

Accepted Answer

A) True 
 B)False  True

Question 2

Utility values typically range from -1 to +1.

Accepted Answer

A) True 
 B)False  False

Question 3

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.   Nick believes there is a 40 percent chance that the market will be good,a 30 percent chance that it will be fair,and a 30 percent chance that it will be poor.A market research firm will analyze market conditions and will provide a perfect forecast (they provide a money back guarantee).What is the most that should be paid for this forecast?

Accepted Answer

A) $ 44,000 
B) $ 53,000 
C) $123,000 
D) $176,000 
E) $132,000 
A) $ 44,000 
B) $ 53,000 
C) $123,000 
D) $176,000 
E) $132,000 C

Question 4

A second table (an opportunity loss table)must be computed when applying the maximin decision criterion.

Accepted Answer

A) True 
 B)False

Question 5

The following figure illustrates a utility curve for someone who is a risk seeker.

Accepted Answer

A) True 
 B)False

Question 6

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).

Question 7

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 8

Consider the following payoff table.   Based upon these probabilities,a person would select Alternative 2.Suppose there is concern about the accuracy of these probabilities.It can be stated that Alternative 2 will remain the best alternative as long as the probability of A is at least

Accepted Answer

A) 0.33. 
B) 0.50. 
C) 0.40. 
D) 0.60. 
E) None of the above 
A) 0.33. 
B) 0.50. 
C) 0.40. 
D) 0.60. 
E) None of the above

Question 9

EVPI (expected value of perfect information)is a measure of the maximum EMV as a result of additional information.

Accepted Answer

A) True 
 B)False

Question 10

A plant manager considers the operational cost per hour of five machine alternatives.The cost per hour is sensitive to three potential weather conditions: cold,mild,and warm.The following table represents the operations cost per hour for each alternative-state of nature combination:   Using the optimistic criterion,which alternative is best?

Accepted Answer

A) Machine 1 
B) Machine 2 
C) Machine 3 
D) Machine 4 
E) Machine 5 
A) Machine 1 
B) Machine 2 
C) Machine 3 
D) Machine 4 
E) Machine 5

Question 11

Which of the following is the fourth step of the "Six Steps in Decision Making"?

Accepted Answer

A) Select one of the mathematical decision theory models. 
B) List the possible alternatives. 
C) Apply the model and make your decision. 
D) List the payoff or profit of each combination of alternatives and outcomes. 
E) Identify the possible outcomes or states of nature. 
A) Select one of the mathematical decision theory models. 
B) List the possible alternatives. 
C) Apply the model and make your decision. 
D) List the payoff or profit of each combination of alternatives and outcomes. 
E) Identify the possible outcomes or states of nature.

Question 12

Which of the following is not a characteristic of a good decision?

Accepted Answer

A) based on logic 
B) considers all available data 
C) considers all possible alternatives 
D) employs appropriate quantitative techniques 
E) always results in a favorable outcome 
A) based on logic 
B) considers all available data 
C) considers all possible alternatives 
D) employs appropriate quantitative techniques 
E) always results in a favorable outcome

Question 13

By studying a person's Utility Curve,one can determine whether the individual is a risk seeker,risk avoider,or is indifferent to risk.

Accepted Answer

A) True 
 B)False

Question 14

Briefly describe decision making under risk.

Accepted Answer

There are several possible out

Question 15

The EMV approach and Utility theory always result in the same choice of alternatives.

Accepted Answer

A) True 
 B)False

Question 16

A manager is deciding whether or not to build a small facility.Demand is uncertain and can be either at a high or low level.If the manager chooses a small facility and demand is low,the payoff is $100.If the manager chooses a small facility and demand is high,the payoff is $300.On the other hand,if the manager chooses a large facility and demand is low,the payoff is -$200,but if demand is high,the payoff is $800.
(a)What would be the best decision based on the Laplace criterion?
(b)What would be the best decision based on Hurwicz's criterion of realism using α = 0.6?

Accepted Answer

(a)large facility -

Question 17

Before a marketing research study was done,John Colorado believed there was a 50/50 chance that his music store would be a success.The research team determined that there is a 0.9 probability that the marketing research will be favorable given a successful music store.There is also a 0.8 probability that the marketing research will be unfavorable given an unsuccessful music store.
(a)If the marketing research is favorable,what is the revised probability of a successful music store?
(b)If the marketing research is unfavorable,what is the revised probability of a successful music store?

Accepted Answer

The answer of Before a marketing research study was done,John...

Question 18

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 19

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 20

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

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

Utility values typically range from -1 to +1.

A second table (an opportunity loss table)must be computed when applying the maximin decision criterion.

The following figure illustrates a utility curve for someone who is a risk seeker.

Utilization of Bayes' theorem requires the use of all but

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

Consider the following payoff table. Based upon these probabilities,a person would select Alternative 2.Suppose there is concern about the accuracy of these probabilities.It can be stated that Alternative 2 will remain the best alternative as long as the probability of A is at least

EVPI (expected value of perfect information)is a measure of the maximum EMV as a result of additional information.

Which of the following is the fourth step of the "Six Steps in Decision Making"?

Which of the following is not a characteristic of a good decision?

By studying a person's Utility Curve,one can determine whether the individual is a risk seeker,risk avoider,or is indifferent to risk.

Briefly describe decision making under risk.

The EMV approach and Utility theory always result in the same choice of alternatives.

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.

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

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,assignment,and Network Models

Integer Programming,goal Programming,and Nonlinear Programming

Project Management

Waiting Lines and Queuing Theory Models

Simulation Modeling

Markov Analysis

Statistical Quality Control

Analytic Hierarchy Process

Dynamic Programming

Decision Theory and the Normal Distribution

Game Theory

Mathematical Tools: Determinants and Matrices

Calculus-Based Optimization

Linear Programming: The Simplex Method

Transportation, Assignment, and Network Algorithms

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Exam 3: Decision Analysis

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

Utility values typically range from -1 to +1.

A second table (an opportunity loss table)must be computed when applying the maximin decision criterion.

The following figure illustrates a utility curve for someone who is a risk seeker.

Utilization of Bayes' theorem requires the use of all but

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

Consider the following payoff table. Based upon these probabilities,a person would select Alternative 2.Suppose there is concern about the accuracy of these probabilities.It can be stated that Alternative 2 will remain the best alternative as long as the probability of A is at least

EVPI (expected value of perfect information)is a measure of the maximum EMV as a result of additional information.

Which of the following is the fourth step of the "Six Steps in Decision Making"?

Which of the following is not a characteristic of a good decision?

By studying a person's Utility Curve,one can determine whether the individual is a risk seeker,risk avoider,or is indifferent to risk.

Briefly describe decision making under risk.

The EMV approach and Utility theory always result in the same choice of alternatives.

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.

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

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,assignment,and Network Models

Integer Programming,goal Programming,and Nonlinear Programming

Project Management

Waiting Lines and Queuing Theory Models

Simulation Modeling

Markov Analysis

Statistical Quality Control

Analytic Hierarchy Process

Dynamic Programming

Decision Theory and the Normal Distribution

Game Theory

Mathematical Tools: Determinants and Matrices

Calculus-Based Optimization

Linear Programming: The Simplex Method

Transportation, Assignment, and Network Algorithms

Filters