Trey Leeman, Operations Manager at National Consumers, Inc.(NCI), is evaluating alternatives for increasing capacity at NCI's Fountain Hill plant.He has identified four alternatives, and has constructed the following payoff table which shows payoffs (in $1,000,000's)for the three possible levels of market demand. $\begin{array}{r} \text { Market Demands }\\ \begin{array}{|c|c|c|c|} \hline \text { Alternative } & \text { Low } & \text { Medium } & \text { High } \\ \hline \text { Lease New Equipment } & -0.5 & 2 & 4 \\ \hline \text { Purchase New Equipment } & -3 & 0.5 & 6 \\ \hline \text { Add Third Shift } & 0.5 & 0.75 & 1 \\ \hline \text { Do Nothing } & 0 & 0 & 0 \\ \hline \end{array}\end{array}$ If Trey uses the maximax criterion, the appropriate alternative would be: _____________.

A) Lease New Equipment B) Purchase New Equipment C) Add Third Shift D) Do Nothing E) Do everything A) Lease New Equipment B) Purchase New Equipment C) Add Third Shift D) Do Nothing E) Do everything

Consider the following decision table with rewards in $ millions. $\begin{array}{r} \text { State of Nature }\\ \begin{array}{|c|c|c|c|} \hline \text { Decision Alternatives } & S_{1} & S_{2} & S_{3} \\ \hline d_{1} & -1 & 2 & 8 \\ \hline d_{2} & -3 & 7 & 5 \\ \hline d_{3} & -0.5 & 0.75 & 1 \\ \hline d_{4} & 0 & 0 & 0 \\ \hline d_{5} & -1 & -1 & -1\\ \hline \end{array}\end{array}$ The opportunity loss for the combination "S2" and "d1" is ________.

A) 9 B) 5 C) 3 D) 0 E) -1 A) 9 B) 5 C) 3 D) 0 E) -1

Trey Leeman, Operations Manager at National Consumers, Inc.(NCI), is evaluating alternatives for increasing capacity at NCI's Fountain Hill plant.He has identified four alternatives, and has constructed the following payoff table which shows payoffs (in $1,000,000's)for the three possible levels of market demand. $\begin{array}{r} \text { Market Demands }\\ \begin{array}{|c|c|c|c|} \hline \text { Alternative } & \text { Low } & \text { Medium } & \text { High } \\ \hline \text { Lease New Equipment } & -0.5 & 2 & 4 \\ \hline \text { Purchase New Equipment } & -3 & 0.5 & 6 \\ \hline \text { Add Third Shift } & 0.5 & 0.75 & 1 \\ \hline \text { Do Nothing } & 0 & 0 & 0 \\ \hline \end{array}\end{array}$ If Trey uses the Hurwicz criterion with alpha = 0.1, the appropriate alternative would be: _____________.

A) Lease New Equipment B) Purchase New Equipment C) Add Third Shift D) Do Nothing E) Do everything A) Lease New Equipment B) Purchase New Equipment C) Add Third Shift D) Do Nothing E) Do everything

Consider the following decision table with rewards in $ millions. $\begin{array}{r} \text { State of Nature }\\ (\begin{array}{|c|c|c|c|} \hline\text { Decision Alternatives } & S_{1} & S_{2} & S_{3} \\ \hline d_{1} & -1 & 2 & 8 \\ \hline d_{2} & -3 &6.5 & 5 \\ \hline d_{3} & -0.5 & 0.75 & 1 \\ \hline d_{4} & 0 & 0 & 0 \\ \hline d_{5} & -1 & -1 & -1\\ \hline \end{array}\end{array}$ If you are using Hurwicz and decide d2, then $\alpha$is ______.

A) undetermined; there is not enough information to find the answer B) unfeasible; there is no value of $\alpha$that would make you choose d2 C) larger than 0.4 D) less than 0.4 E) less than 0.67 A) undetermined; there is not enough information to find the answer B) unfeasible; there is no value of $\alpha$that would make you choose d2 C) larger than 0.4 D) less than 0.4 E) less than 0.67

Exam 19: Decision Analysis

Ray Crofford is evaluating investment alternatives to invest $100,000 which he inherited from his grandfather.His investment advisor has identified four alternatives and constructed the following payoff table which shows expected profits (in $10,000's)for various market conditions. $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\text { Market Condition }$ Investment Bull Neutral Bear T-Bills 3 3 3 Stocks 21 11 -30 Bonds 15 4 -3 Mixture 13 6 -10 If Ray uses the maximax criterion, the appropriate choice would be ________.

(Multiple Choice)

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Question 61

In a decision-making scenario, if the decision maker knows which state of nature will occur, the scenario is called decision-making under certainty.

(True/False)

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Question 62

In a decision analysis problem, variables (such as benefits or rewards that result from investments in common stocks or corporate bonds and from a new product launch)which result from selecting a particular decision alternative are called posterior probabilities.

(True/False)

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Question 63

Ray Crofford is evaluating investment alternatives for the $100,000 which he inherited from his grandfather.His investment advisor has identified two alternatives and constructed the following tables which show (1)expected profits (in $10,000's)for various market conditions and their probabilities, and (2)the advisor's track record on predicting Bull and Bear markets. $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\text { Actual Market }$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\text { Market Condition }$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\text {Advisor's}$ $\quad$ $\text {Condition}$ Investment Bull (0.8) Bear (0.2) EMV Bonds 12 -3 9 Stocks 25 -30 14 Prediction Bull Bear Bull 0.9 0.3 Bear 0.1 0.7 The EMV of this investment opportunity with the advisor's prediction is closest to ________.

(Multiple Choice)

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Question 64

A particular electronic component is produced at two plants for an electronics manufacturer.Plant A produces 70% of the components used and the remainder are produced by plant B.The probability that a component is defective is 0.02 if it is produced at plant A and 0.01 if it is produced at plant B.If the component is defective the revised probability it is produced at plant B, P (B|D), is closest to ________

(Multiple Choice)

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Question 65

In decision-making under risk, the expected monetary payoff of perfect information is the weighted average of the best payoff for each state of nature (using the probability of the state of nature as the weight).

(True/False)

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Question 66

With no additional information, an investor expects a monetary value of $2,840 through her investment choices.Additional information on the likelihood of a strong stock market would cost $800.With that additional information, the investor can expect a monetary value of $3,610.The investor ___ purchase the additional information as after paying for the information, the expected monetary value would be .

(Multiple Choice)

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Question 67

Trey Leeman, Operations Manager at National Consumers, Inc.(NCI), is evaluating alternatives for increasing capacity at NCI's Fountain Hill plant.He has identified four alternatives, and has constructed the following payoff table which shows payoffs (in $1,000,000's)for the three possible levels of market demand. Market Demands Alternative Low Medium High Lease New Equipment -0.5 2 4 Purchase New Equipment -3 0.5 6 Add Third Shift 0.5 0.75 1 Do Nothing 0 0 0 If Trey uses the maximax criterion, the appropriate alternative would be: _____________.

(Multiple Choice)

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Question 68

In decision-making under risk, the expected monetary value without information is the largest of the expected monetary values for the various decision alternatives.

(True/False)

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Question 69

Consider the following decision table with rewards in $ millions. State of Nature Decision Alternatives -1 2 8 -3 7 5 -0.5 0.75 1 0 0 0 -1 -1 -1 The opportunity loss for the combination "S₂" and "d₁" is ________.

(Multiple Choice)

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Question 70

A CEO is looking to determine how much profit the company can make if they purchase one of their competitors.Key to the decision is how much profit each competitor is likely to make given different levels of future demand in their market.In this situation, the levels of future demand in the market would be considered the ____________.

(Multiple Choice)

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Question 71

Dianna Ivy is evaluating a plan to expand the production facilities of International Compressors Company which manufactures natural gas compressors.Dianna feels that the price of coal is a significant factor in her decision.Below are her estimates of payoffs from various expansion plans under different prices of coal.If Diana knows the price of coal in the future will be higher, what expansion plan should she select? PAYOFFE ( \riil ) Lower \arre Higher Larpe exparisior -\ 500 -\ 100 \ 1,000 Medimer exparision -\ 300 \ 150 \ 800 Brrall exparisior -\ 50 \ 100 \ 400 No exparisior \ 0 \ 75 \ 300

(Multiple Choice)

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Question 72

Dianna Ivy is evaluating a plan to expand the production facilities of International Compressors Company which manufactures natural gas compressors.Dianna feels that the price of coal is a significant factor in her decision, but she cannot control it.For her decision, the different prices of coal represent the _____________.

(Multiple Choice)

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Question 73

A random person is selected from a large population in which 5% are users of a dangerous illegal drug.A drug test that correctly identifies users 99% of the times and nonusers 95% of the time is administered to this individual and gives a positive result.What is the probability that this individual is actually a user of this drug?

(Multiple Choice)

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Question 74

Trey Leeman, Operations Manager at National Consumers, Inc.(NCI), is evaluating alternatives for increasing capacity at NCI's Fountain Hill plant.He has identified four alternatives, and has constructed the following payoff table which shows payoffs (in $1,000,000's)for the three possible levels of market demand. Market Demands Alternative Low Medium High Lease New Equipment -0.5 2 4 Purchase New Equipment -3 0.5 6 Add Third Shift 0.5 0.75 1 Do Nothing 0 0 0 If Trey uses the Hurwicz criterion with alpha = 0.1, the appropriate alternative would be: _____________.

(Multiple Choice)

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Question 75

Consider the following decision table with rewards in $ millions. State of Nature ( Decision Alternatives -1 2 8 -3 6.5 5 -0.5 0.75 1 0 0 0 -1 -1 -1 If you are using Hurwicz and decide d₂, then $\alpha$ is ______.

(Multiple Choice)

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Question 76

In a decision-making under uncertainty scenario, the decision maker attempts to develop a strategy based on payoffs since virtually no information is available about which state of nature will occur.

(True/False)

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Question 77

A CEO is looking to determine how much profit the company can make if they purchase one of their competitors.Key to the decision is how much profit each competitor is likely to make given different levels of future demand in their market.Estimates of the profits for each competitor that could be purchased are estimated in the table below based on demand.If the CEO is unsure about future demand, which competitor should the company purchase? PAYOFFS ( \mil ) Biprificarit decrease Small decrease Bmall increase Siprificarit increase Competitor A \ 50 \ 100 \ 270 \ 1,450 Competitor B \ 25 \ 75 \ 350 \ 1,330 Competitor C \ 15 \ 80 \ 300 \ 1,700 Competitor D \ 55 \ 90 \ 33 \ 1,500

(Multiple Choice)

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Question 78

A risk-avoider decision maker will bail out of a risky scenario only if the compensation to bail out is more than the expected monetary payoff from the risky scenario.

(True/False)

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Question 79

The expected value of sample information is the ratio of the expected monetary value with information to the expected monetary value without information.

(True/False)

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Question 80

In a decision-making scenario, if the decision maker knows which state of nature will occur, the scenario is called decision-making under certainty.

In a decision analysis problem, variables (such as benefits or rewards that result from investments in common stocks or corporate bonds and from a new product launch)which result from selecting a particular decision alternative are called posterior probabilities.

In decision-making under risk, the expected monetary payoff of perfect information is the weighted average of the best payoff for each state of nature (using the probability of the state of nature as the weight).

In decision-making under risk, the expected monetary value without information is the largest of the expected monetary values for the various decision alternatives.

Consider the following decision table with rewards in $ millions. State of Nature Decision Alternatives -1 2 8 -3 7 5 -0.5 0.75 1 0 0 0 -1 -1 -1 The opportunity loss for the combination "S₂" and "d₁" is ________.

Consider the following decision table with rewards in $ millions. State of Nature ( Decision Alternatives -1 2 8 -3 6.5 5 -0.5 0.75 1 0 0 0 -1 -1 -1 If you are using Hurwicz and decide d₂, then $\alpha$ is ______.

In a decision-making under uncertainty scenario, the decision maker attempts to develop a strategy based on payoffs since virtually no information is available about which state of nature will occur.

A risk-avoider decision maker will bail out of a risky scenario only if the compensation to bail out is more than the expected monetary payoff from the risky scenario.

The expected value of sample information is the ratio of the expected monetary value with information to the expected monetary value without information.

Introduction to Statistics and Business Analytics

Visualizing Data With Charts and Graphs

Descriptive Statistics

Probability

Discrete Distributions

Continuous Distributions

Sampling and Sampling Distributions

Statistical Inference: Estimation for Single Populations

Statistical Inference: Hypothesis Testing for Single Populations

Statistical Inferences About Two Populations

Analysis of Variance and Design of Experiments

Simple Regression Analysis and Correlation

Multiple Regression Analysis

Building Multiple Regression Models

Time-Series Forecasting and Index Numbers

Analysis of Categorical Data

Nonparametric Statistics

Statistical Quality Control

Filters

Exam 19: Decision Analysis

In a decision-making scenario, if the decision maker knows which state of nature will occur, the scenario is called decision-making under certainty.

In a decision analysis problem, variables (such as benefits or rewards that result from investments in common stocks or corporate bonds and from a new product launch)which result from selecting a particular decision alternative are called posterior probabilities.

In decision-making under risk, the expected monetary payoff of perfect information is the weighted average of the best payoff for each state of nature (using the probability of the state of nature as the weight).

In decision-making under risk, the expected monetary value without information is the largest of the expected monetary values for the various decision alternatives.

Consider the following decision table with rewards in $ millions. State of Nature Decision Alternatives -1 2 8 -3 7 5 -0.5 0.75 1 0 0 0 -1 -1 -1 The opportunity loss for the combination "S2" and "d1" is ________.

Consider the following decision table with rewards in $ millions. State of Nature ( Decision Alternatives -1 2 8 -3 6.5 5 -0.5 0.75 1 0 0 0 -1 -1 -1 If you are using Hurwicz and decide d2, then α\alphaα is ______.

In a decision-making under uncertainty scenario, the decision maker attempts to develop a strategy based on payoffs since virtually no information is available about which state of nature will occur.

A risk-avoider decision maker will bail out of a risky scenario only if the compensation to bail out is more than the expected monetary payoff from the risky scenario.

The expected value of sample information is the ratio of the expected monetary value with information to the expected monetary value without information.

Introduction to Statistics and Business Analytics

Visualizing Data With Charts and Graphs

Descriptive Statistics

Probability

Discrete Distributions

Continuous Distributions

Sampling and Sampling Distributions

Statistical Inference: Estimation for Single Populations

Statistical Inference: Hypothesis Testing for Single Populations

Statistical Inferences About Two Populations

Analysis of Variance and Design of Experiments

Simple Regression Analysis and Correlation

Multiple Regression Analysis

Building Multiple Regression Models

Time-Series Forecasting and Index Numbers

Analysis of Categorical Data

Nonparametric Statistics

Statistical Quality Control

Filters

Consider the following decision table with rewards in $ millions. State of Nature Decision Alternatives -1 2 8 -3 7 5 -0.5 0.75 1 0 0 0 -1 -1 -1 The opportunity loss for the combination "S₂" and "d₁" is ________.

Consider the following decision table with rewards in $ millions. State of Nature ( Decision Alternatives -1 2 8 -3 6.5 5 -0.5 0.75 1 0 0 0 -1 -1 -1 If you are using Hurwicz and decide d₂, then $\alpha$ is ______.