Question 1

Identify, in order, the six steps of analytical decision making.

Accepted Answer

1. Clearly define the problem and factor

Question 2

An example of a conditional value would be the payoff from selecting a particular alternative when a particular state of nature occurs.

Accepted Answer

A) True 
 B)False

Question 3

Suppose a manufacturing plant is considering three options for expansion. The first one is to expand into a new plant (large), the second to add on third-shift to the daily schedule (medium), and the third to do nothing (small). There are three possibilities for demand. These are high, medium, and low with each having an equal likelihood of occurring. Suppose that the profits for the expansion plans are as follows (respective to high, medium, low demand). The large expansion profits are $90000, $20000, -$15000, the medium expansion choice $30000, $20000, $6000 and the small expansion choice $12000, $9000, $7000. Calculate the EMV of each choice. Which of the expansion plans should the manager choose?

Accepted Answer

Student responses may include a decision

Question 4

The expected value with perfect information

Accepted Answer

A)  equals EVPI - EMV. 
B)  requires that each decision alternative have a known probability of occurrence. 
C)  is an input into the calculation of the expected value of perfect information. 
D)  is the average of the maximax and the maximin. 
E)  none of the above. 
A)  equals EVPI - EMV. 
B)  requires that each decision alternative have a known probability of occurrence. 
C)  is an input into the calculation of the expected value of perfect information. 
D)  is the average of the maximax and the maximin. 
E)  none of the above.

Question 5

Suppose a manufacturing plant is considering three options for expansion. The first one is to expand into a new plant (large), the second to add on third-shift to the daily schedule (medium), and the third to do nothing (small). There are three possibilities for demand. These are high, medium, and low with each having an equal likelihood of occurring. Suppose that the profits for the expansion plans are as follows (respective to high, medium, low demand). The large expansion profits are $40000, $20000, -$30000, the medium expansion choice $30000, $15000, $12000 and the small expansion choice $9000, $6000, $3000. Calculate the EMV of each choice. Which of the expansion plans should the manager choose?

Accepted Answer

Student responses may include a decision

Question 6

What is the expected value with perfect information in the following decision table? States of Nature
$$\begin{array} { | c | c | c | } 
\hline \text { Alternatives } & \mathrm { S } _ { 1 } & \mathrm {~S} _ { 2 } \
\hline \mathrm { p } & .6 & .4 \
\hline \text { Option } 1 & 200 & 300 \
\hline \text { Option } 2 & 50 & 350 \
\hline
\end{array}$$

Accepted Answer

A)  50 
B)  200 
C)  260 
D)  300 
E)  350 
A)  50 
B)  200 
C)  260 
D)  300 
E)  350

Question 7

How is the expected value of perfect information (EVPI) found?

Accepted Answer

It is found by taking the expe

Question 8

What is the expected value with perfect information of the following decision table? States of Nature
$$\begin{array} { | c | c | c | } 
\hline \text { Alternatives } & \mathrm { S } _ { 1 } & \mathrm {~S} _ { 2 } \
\hline \mathrm { p } & .4 & .6 \
\hline \text { Option 1 } & 10,000 & 30,000 \
\hline \text { Option 2 } & 5,000 & 45,000 \
\hline \text { Option 3 } & - 4,000 & 60,000 \
\hline
\end{array}$$

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 9

If a decision maker knows for sure which state of nature will occur, he/she is making a decision under certainty.

Accepted Answer

A) True 
 B)False

Question 10

When solving decision trees, what phrase represents the act of dropping an alternative from consideration because it is less favorable than another available option?

Accepted Answer

A)  cut the leaf 
B)  open the hatch 
C)  shake the tree 
D)  punt the ball 
E)  prune the branch 
A)  cut the leaf 
B)  open the hatch 
C)  shake the tree 
D)  punt the ball 
E)  prune the branch

Question 11

A branch of a decision tree that is less favorable than other available options may be ________.

Accepted Answer

The answer of A branch of a decision tree that...

Question 12

What is the expected value of perfect information of the following decision table? States of Nature
$$\begin{array} { | c | c | c | } 
\hline \text { Alternatives } & \mathrm { S } _ { 1 } & \mathrm {~S} _ { 2 } \
\hline \mathrm { p } & .6 & .4 \
\hline \text { Option } 1 & 200 & 300 \
\hline \text { Option } 2 & 50 & 350 \
\hline
\end{array}$$

Accepted Answer

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

Question 13

Analytic decision making is based on logic and considers all available data and possible alternatives.

Accepted Answer

A) True 
 B)False

Question 14

In the context of decision-making, define alternative.

Accepted Answer

An alternative is a

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.
 $$\begin{array} { | l | r | r | r | } 
\hline \text { Profit } &  { \text { Light } } & \text { Medium } & { \text { Heavy } } \
\hline \text { Probability } & 0.18 & 0.52 & 0.3 \
\hline \text { Wind-up } & 70 & 20 & 120 \
\hline \text { Pneumatic } & 80 & 90 & 100 \
\hline \text { Electrical } & 50 & 150 & 30 \
\hline
\end{array}$$ 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

The answer of A toy manufacturer has three different mechanisms...

Question 16

A decision tree is a(n)

Accepted Answer

A)  algebraic representation of alternatives and states of nature. 
B)  behavioral representation of alternatives and states of nature. 
C)  matrix representation of alternatives and states of nature. 
D)  graphic representation of alternatives and states of nature. 
E)  tabular representation of alternatives and states of nature. 
A)  algebraic representation of alternatives and states of nature. 
B)  behavioral representation of alternatives and states of nature. 
C)  matrix representation of alternatives and states of nature. 
D)  graphic representation of alternatives and states of nature. 
E)  tabular representation of alternatives and states of nature.

Question 17

Miles is considering buying a new pickup truck for his lawn service firm. The economy in town seems to be growing, and he is wondering whether he should opt for a subcompact, compact, or full-size pickup truck. The smaller truck would have better fuel economy, but would sacrifice capacity and some durability. A friend at the Bureau of Economic Research told him that there is a 30% chance of lower gas prices in his area this year, a 20% chance of higher gas prices, and a 50% chance that gas prices will stay roughly unchanged. Based on this information, Miles has developed a decision table that indicates the profit amount he would end up with after a year for each combination of truck and gas prices.
States of Nature
 $$\begin{array} { | l | c | c | c | } 
\hline \text { Alternatives } & \text { Lower gas prices } & \text { Gas prices unchanged } & \text { Higher gas prices } \
\hline \text { probability } & .3 & .5 & 2 \
\hline \text { Subcompact } & 16,000 & 21,000 & 23,000 \
\hline \text { Compact } & 15,000 & 20,000 & 22,000 \
\hline \text { Full size } & 18,000 & 19,000 & 6,000 \
\hline
\end{array}$$ Calculate the expected monetary value for each decision alternative. Which decision yields the highest EMV?

Accepted Answer

The expected values are: subco

Question 18

The decision criterion that would be used by an optimistic decision maker solving a problem under conditions of uncertainty would be the

Accepted Answer

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

Question 19

If a decision maker can assign probabilities of occurrences to the states of nature, then the decision-making environment is Decision Making under Uncertainty.

Accepted Answer

A) True 
 B)False

Question 20

What is the EMV for Option 1 in the following decision table? States of Nature
$$\begin{array} { | c | c | c | } 
\hline \text { Alternatives } & \mathrm { S } _ { 1 } & \mathrm {~S} _ { 2 } \
\hline \mathrm { p } & .3 & .7 \
\hline \text { Option } 1 & 15,000 & 20,000 \
\hline \text { Option } 2 & 10,000 & 30,000 \
\hline
\end{array}$$

Accepted Answer

A)  15,000 
B)  17,000 
C)  17,500 
D)  18,500 
E)  20,000 
A)  15,000 
B)  17,000 
C)  17,500 
D)  18,500 
E)  20,000

Exam 18: Decision-Making Tools

Identify, in order, the six steps of analytical decision making.

An example of a conditional value would be the payoff from selecting a particular alternative when a particular state of nature occurs.

The expected value with perfect information

What is the expected value with perfect information in the following decision table? States of Nature Alternatives .6 .4 Option 1 200 300 Option 2 50 350

How is the expected value of perfect information (EVPI) found?

What is the expected value with perfect information of the following decision table? States of Nature Alternatives .4 .6 Option 1 10,000 30,000 Option 2 5,000 45,000 Option 3 -4,000 60,000

If a decision maker knows for sure which state of nature will occur, he/she is making a decision under certainty.

When solving decision trees, what phrase represents the act of dropping an alternative from consideration because it is less favorable than another available option?

A branch of a decision tree that is less favorable than other available options may be ________.

What is the expected value of perfect information of the following decision table? States of Nature Alternatives .6 .4 Option 1 200 300 Option 2 50 350

Analytic decision making is based on logic and considers all available data and possible alternatives.

In the context of decision-making, define alternative.

A decision tree is a(n)

The decision criterion that would be used by an optimistic decision maker solving a problem under conditions of uncertainty would be the

If a decision maker can assign probabilities of occurrences to the states of nature, then the decision-making environment is Decision Making under Uncertainty.

What is the EMV for Option 1 in the following decision table? States of Nature Alternatives .3 .7 Option 1 15,000 20,000 Option 2 10,000 30,000

Operations and Productivity

Operations Strategy in a Global Environment

Project Management

Forecasting

Design of Goods and Services

Managing Quality

Process Strategy and Sustainability

Location Strategies

Layout Strategies

Human Resources, Job Design, and Work Measurement

Supply-Chain Management

Inventory Management

Aggregate Planning

Material Requirements Planning Mrp and Erp

Short-Term Scheduling

Lean Operations

Maintenance and Reliability

Linear Programming

Transportation Models

Waiting-Line Models

Learning Curves

Simulation

Supply Chain Management Analytics

Sustainability in the Supply Chain

Statistical Process Control

Capacity and Constraint Management

Filters