Question 1

Which of the following is true of decision trees when used to solve a complex problem?

Accepted Answer

A) They provide a useful way to decompose the problem. 
B) They are used to compute a decision maker's risk tolerance. 
C) They can be converted into truth tables. 
D) They can be used only when the decision maker is risk neutral. 
A) They provide a useful way to decompose the problem. 
B) They are used to compute a decision maker's risk tolerance. 
C) They can be converted into truth tables. 
D) They can be used only when the decision maker is risk neutral.

Question 2

Brett wants to sell throw blankets for the holiday season at a local flea market. Brett purchases the throws for $15 and sells them to his customers for $35. The rental space is fixed fee of $1,500 for the season. Assume there is no leftover value for unsold units. If he orders 200 and demand is 150, what is the payoff?

Accepted Answer

A) $800 
B) $50 
C) $750 
D) $2,800 
A) $800 
B) $50 
C) $750 
D) $2,800

Question 3

Bayes' theorem

Accepted Answer

A) can be used only for cases where conditional probabilities are unknown. 
B) cannot be used to calculate posterior probabilities. 
C) enables the use of sample information to revise prior probabilities. 
D) is useful for determining optimal decisions without requiring knowledge of probabilities of the states of nature. 
A) can be used only for cases where conditional probabilities are unknown. 
B) cannot be used to calculate posterior probabilities. 
C) enables the use of sample information to revise prior probabilities. 
D) is useful for determining optimal decisions without requiring knowledge of probabilities of the states of nature.

Question 4

The amount of loss (lower profit or higher cost) from not making the best decision for each state of nature is known as

Accepted Answer

A) best payoff. 
B) opportunity loss. 
C) risk profile. 
D) utility. 
A) best payoff. 
B) opportunity loss. 
C) risk profile. 
D) utility.

Question 5

For a minimization problem, the optimistic approach often is referred to as the __________ approach.

Accepted Answer

A) maximin 
B) minimax 
C) minimin 
D) maximax 
A) maximin 
B) minimax 
C) minimin 
D) maximax

Question 6

Using the data below, what would be the joint probabilities, P(U ? Sj)? ? $$\begin{array} { c c c } 
\begin{array} { c } 
\text { States of Nature } \
( s j )
\end{array} & \begin{array} { c } 
\text { Prior } \
\text { Probabilities } \
P ( s j )
\end{array} & \begin{array} { c } 
\text { Conditional } \
\text { Probabilities } \
P ( U \mid s j )
\end{array} \
\hline s 1 & 0.65 & 0.75 \
s 2 & 0.20 & 0.35 \
s 3 & 0.15 & 0.20 \
\hline \text { Total } & 1.00 & \
\hline
\end{array}$$

Accepted Answer

A) 0.83, 0.12, and 0.05 
B) 0.49, 0.07, and 0.03 
C) 0.47, 0.49, and 0.04 
D) 1.00, 0.59, and 1.00 
A) 0.83, 0.12, and 0.05 
B) 0.49, 0.07, and 0.03 
C) 0.47, 0.49, and 0.04 
D) 1.00, 0.59, and 1.00

Question 7

A special case of sample information where the information tells the decision maker exactly which state of nature is going to occur is known as __________ information.

Accepted Answer

A) perfect 
B) mutual 
C) conditional 
D) prior 
A) perfect 
B) mutual 
C) conditional 
D) prior

Question 8

A __________ is a decision maker who would choose a guaranteed payoff over a lottery with a better expected payoff.

Accepted Answer

A) risk taker 
B) risk-neutral 
C) risk avoider 
D) risk-creator 
A) risk taker 
B) risk-neutral 
C) risk avoider 
D) risk-creator

Question 9

New information obtained through research or experimentation that enables an updating or revision of the state-of-nature probabilities is known as

Accepted Answer

A) joint probability. 
B) sample information. 
C) conditional probability. 
D) expected utility. 
A) joint probability. 
B) sample information. 
C) conditional probability. 
D) expected utility.

Question 10

Using the Table below, which is the recommended decision alternative using the conservative approach? ? $$\begin{array}{l}
\text { Payoff Table }\
\begin{array} { | c | c | c | } 
\hline \text { Decision Alternative } & \text { State of Nature 1 } & \text { State of Nature 2 } \
\hline d _ { 1 } & 5 & 7 \
\hline d _ { 2 } & - 4 & 1 \
\hline d _ { 3 } & 1 & - 3 \
\hline d _ { 4 } & 10 & 2 \
\hline d _ { 5 } & 6 & 4 \
\hline
\end{array}
\end{array}$$

Accepted Answer

A) d1 
B) d5 
C) d2 
D) d3 
A) d1 
B) d5 
C) d2 
D) d3

Question 11

__________ refer to the probabilities of the states of nature after revising the prior probabilities based on sample information.

Accepted Answer

A) Preliminary probabilities 
B) Perfect probabilities 
C) Joint probabilities 
D) Posterior probabilities 
A) Preliminary probabilities 
B) Perfect probabilities 
C) Joint probabilities 
D) Posterior probabilities

Question 12

An uncertain future event affecting the consequence associated with a decision is known as a

Accepted Answer

A) chance event. 
B) decision alternative. 
C) decision node. 
D) payoff. 
A) chance event. 
B) decision alternative. 
C) decision node. 
D) payoff.

Question 13

The parameter R in the exponential utility function U(x) = 1 - e-x/R represents the decision maker's risk tolerance. Larger values of R indicate that the decision maker

Accepted Answer

A) is less risk averse (closer to neutral). 
B) is more risk averse (has less risk tolerance). 
C) is not concerned with risk. 
D) will accept the gamble. 
A) is less risk averse (closer to neutral). 
B) is more risk averse (has less risk tolerance). 
C) is not concerned with risk. 
D) will accept the gamble.

Question 14

Using the Table below, which is the recommended decision alternative using the optimistic approach? ? $$\begin{array}{l}
\text { Payoff Table }\
\begin{array} { | c | c | c | } 
\hline \text { Decision Alternative } & \text { State of Nature 1 } & \text { State of Nature 2 } \
\hline d _ { 1 } & 5 & 7 \
\hline d _ { 2 } & - 4 & 1 \
\hline d _ { 3 } & 1 & - 3 \
\hline d _ { 4 } & 10 & 2 \
\hline d _ { 5 } & 6 & 4 \
\hline
\end{array}
\end{array}$$

Accepted Answer

A) d1 
B) d4 
C) d2 
D) d5 
A) d1 
B) d4 
C) d2 
D) d5

Question 15

Which of the following is the value of e, the mathematical constant used in the exponential utility function, U(x) = 1 - e-x/R?

Accepted Answer

A) 3.14159 
B) 2.71828 
C) 1 
D) The value of e depends on the risk tolerance value. 
A) 3.14159 
B) 2.71828 
C) 1 
D) The value of e depends on the risk tolerance value.

Question 16

The study of how changes in the probability assessments for the states of nature or changes in the payoffs affect the recommended decision alternative is known as

Accepted Answer

A) uncertainty analysis. 
B) cost analysis. 
C) sensitivity analysis. 
D) probability analysis. 
A) uncertainty analysis. 
B) cost analysis. 
C) sensitivity analysis. 
D) probability analysis.

Question 17

__________ refers to the probability of one event, given the known outcome of a (possibly) related event.

Accepted Answer

A) Joint probability 
B) Priori probability 
C) Decisive probability 
D) Conditional probability 
A) Joint probability 
B) Priori probability 
C) Decisive probability 
D) Conditional probability

Question 18

A measure of the outcome of a decision such as profit, cost, or time is known as a

Accepted Answer

A) branch. 
B) payoff. 
C) regret. 
D) forecasting index. 
A) branch. 
B) payoff. 
C) regret. 
D) forecasting index.

Question 19

The __________ approach evaluates each decision alternative in terms of the best payoff that can occur.

Accepted Answer

A) conservative 
B) optimistic 
C) maximin regret 
D) expected value 
A) conservative 
B) optimistic 
C) maximin regret 
D) expected value

Question 20

For a maximization problem, the optimistic approach often is referred to as the __________ approach.

Accepted Answer

A) minimin 
B) maximin 
C) minimax 
D) maximax 
A) minimin 
B) maximin 
C) minimax 
D) maximax

Which of the following is true of decision trees when used to solve a complex problem?

Bayes' theorem

The amount of loss (lower profit or higher cost) from not making the best decision for each state of nature is known as

For a minimization problem, the optimistic approach often is referred to as the __________ approach.

Using the data below, what would be the joint probabilities, P(U ? S_j)? ? States of Nature (sj) Prior Probabilities P(sj) Conditional Probabilities P(U\midsj) s1 0.65 0.75 s2 0.20 0.35 s3 0.15 0.20 Total 1.00

A special case of sample information where the information tells the decision maker exactly which state of nature is going to occur is known as __________ information.

A __________ is a decision maker who would choose a guaranteed payoff over a lottery with a better expected payoff.

New information obtained through research or experimentation that enables an updating or revision of the state-of-nature probabilities is known as

Using the Table below, which is the recommended decision alternative using the conservative approach? ? Payoff Table Decision Alternative State of Nature 1 State of Nature 2 5 7 -4 1 1 -3 10 2 6 4

__________ refer to the probabilities of the states of nature after revising the prior probabilities based on sample information.

An uncertain future event affecting the consequence associated with a decision is known as a

The parameter R in the exponential utility function U(x) = 1 - e^-^x^/^R represents the decision maker's risk tolerance. Larger values of R indicate that the decision maker

Using the Table below, which is the recommended decision alternative using the optimistic approach? ? Payoff Table Decision Alternative State of Nature 1 State of Nature 2 5 7 -4 1 1 -3 10 2 6 4

Which of the following is the value of e, the mathematical constant used in the exponential utility function, U(x) = 1 - e^-^x^/^R?

The study of how changes in the probability assessments for the states of nature or changes in the payoffs affect the recommended decision alternative is known as

__________ refers to the probability of one event, given the known outcome of a (possibly) related event.

A measure of the outcome of a decision such as profit, cost, or time is known as a

The __________ approach evaluates each decision alternative in terms of the best payoff that can occur.

For a maximization problem, the optimistic approach often is referred to as the __________ approach.

Introduction

Descriptive Statistics

Data Visualization

Descriptive Data Mining

Probability: an Introduction to Modeling Uncertainty

Statistical Inference

Linear Regression

Time Series Analysis and Forecasting

Predictive Data Mining

Spreadsheet Models

Monte Carlo Simulation

Linear Optimization Models

Integer Linear Optimization Models

Nonlinear Optimization Models

Filters

Exam 15: Decision Analysis

Which of the following is true of decision trees when used to solve a complex problem?

Bayes' theorem

The amount of loss (lower profit or higher cost) from not making the best decision for each state of nature is known as

For a minimization problem, the optimistic approach often is referred to as the __________ approach.

Using the data below, what would be the joint probabilities, P(U ? Sj)? ? States of Nature (sj) Prior Probabilities P(sj) Conditional Probabilities P(U\midsj) s1 0.65 0.75 s2 0.20 0.35 s3 0.15 0.20 Total 1.00

A special case of sample information where the information tells the decision maker exactly which state of nature is going to occur is known as __________ information.

A __________ is a decision maker who would choose a guaranteed payoff over a lottery with a better expected payoff.

New information obtained through research or experimentation that enables an updating or revision of the state-of-nature probabilities is known as

Using the Table below, which is the recommended decision alternative using the conservative approach? ? Payoff Table Decision Alternative State of Nature 1 State of Nature 2 5 7 -4 1 1 -3 10 2 6 4

__________ refer to the probabilities of the states of nature after revising the prior probabilities based on sample information.

An uncertain future event affecting the consequence associated with a decision is known as a

The parameter R in the exponential utility function U(x) = 1 - e-x/R represents the decision maker's risk tolerance. Larger values of R indicate that the decision maker

Using the Table below, which is the recommended decision alternative using the optimistic approach? ? Payoff Table Decision Alternative State of Nature 1 State of Nature 2 5 7 -4 1 1 -3 10 2 6 4

Which of the following is the value of e, the mathematical constant used in the exponential utility function, U(x) = 1 - e-x/R?

The study of how changes in the probability assessments for the states of nature or changes in the payoffs affect the recommended decision alternative is known as

__________ refers to the probability of one event, given the known outcome of a (possibly) related event.

A measure of the outcome of a decision such as profit, cost, or time is known as a

The __________ approach evaluates each decision alternative in terms of the best payoff that can occur.

For a maximization problem, the optimistic approach often is referred to as the __________ approach.

Introduction

Descriptive Statistics

Data Visualization

Descriptive Data Mining

Probability: an Introduction to Modeling Uncertainty

Statistical Inference

Linear Regression

Time Series Analysis and Forecasting

Predictive Data Mining

Spreadsheet Models

Monte Carlo Simulation

Linear Optimization Models

Integer Linear Optimization Models

Nonlinear Optimization Models

Filters

Using the data below, what would be the joint probabilities, P(U ? S_j)? ? States of Nature (sj) Prior Probabilities P(sj) Conditional Probabilities P(U\midsj) s1 0.65 0.75 s2 0.20 0.35 s3 0.15 0.20 Total 1.00

The parameter R in the exponential utility function U(x) = 1 - e^-^x^/^R represents the decision maker's risk tolerance. Larger values of R indicate that the decision maker

Which of the following is the value of e, the mathematical constant used in the exponential utility function, U(x) = 1 - e^-^x^/^R?