Exam 20: Decision Making

SCENARIO 20-6 A student wanted to find out the optimal strategy to study for a Business Statistics exam with scores out of 100 possible points.He constructed the following payoff table based on the mean amount of time he needed to study every week for the course and the degree of difficulty of the exam.From the information that he gathered from students who had taken the course,he concluded that there was a 40% probability that the exam would be easy. -Referring to Scenario 20-6,the optimal strategy using the maximin criterion is to study 16 hours per week on average for the exam.

In a local cellular phone area,company A accounts for 60% of the cellular phone market,while company B accounts for the remaining 40% of the market.Of the cellular calls made with company A,1% of the calls will have some sort of interference,while 2% of the cellular calls with company B will have interference.If a cellular call is selected at random and has interference,what is the probability that it was with company A?

SCENARIO 20-1 The following payoff table shows profits associated with a set of 3 alternatives under 2 possible states of nature. -Referring to Scenario 20-1,if the probability of S1 is 0.5,then the coefficient of variation for A2 is

SCENARIO 20-1 The following payoff table shows profits associated with a set of 3 alternatives under 2 possible states of nature. -Referring to Scenario 20-1,if the probability of S1 is 0.2 and S2 is 0.8,then the expected monetary value of A1 is

A medical doctor is involved in a $1 million malpractice suit.He can either settle out of court for $250,000 or go to court.If he goes to court and loses,he must pay $825,000 plus $175,000 in court costs.If he wins in court the plaintiffs pay the court costs.Identify the outcomes of this decision- making problem.

SCENARIO 20-1 The following payoff table shows profits associated with a set of 3 alternatives under 2 possible states of nature. -Referring to Scenario 20-1,what is the best action using the maximax criterion?

SCENARIO 20-3 The following information is from 2 investment opportunities. -Referring to Scenario 20-3,which investment has the optimal coefficient of variation?

SCENARIO 20-1 The following payoff table shows profits associated with a set of 3 alternatives under 2 possible states of nature. -Referring to Scenario 20-1,the opportunity loss for A3 when S2 occurs is

SCENARIO 20-5 The following payoff table shows profits associated with a set of 2 alternatives under 3 possible events. Suppose that the probability of Event 1 is 0.2,Event 2 is 0.5,and Event 3 is 0.3. -Referring to Scenario 20-5,what is the EVPI for this problem?

In portfolio analysis,the _____ is the reciprocal of the return to risk ratio.

SCENARIO 20-2 The following payoff matrix is given in dollars. Suppose the probability of Event 1 is 0.5 and Event 2 is 0.5. -Referring to Scenario 20-2,what is the best action using the maximin criterion?

A company that manufactures designer jeans is contemplating whether to increase its advertising budget by $1 million for next year.If the expanded advertising campaign is successful,the company expects sales to increase by $1.6 million next year.If the advertising campaign fails,the company expects sales to increase by only $400,000 next year.If the advertising budget is not increased,the company expects sales to increase by $200,000.Identify the actions in this decision-making problem.

SCENARIO 20-6 A student wanted to find out the optimal strategy to study for a Business Statistics exam with scores out of 100 possible points.He constructed the following payoff table based on the mean amount of time he needed to study every week for the course and the degree of difficulty of the exam.From the information that he gathered from students who had taken the course,he concluded that there was a 40% probability that the exam would be easy. -Referring to Scenario 20-6,what is the return-to-risk ratio of spending 8 hours per week on average studying for the exam?

Blossom's Flowers purchases roses for sale for Valentine's Day.The roses are purchased for $10 a dozen and are sold for $20 a dozen.Any roses not sold on Valentine's Day can be sold for $5 per dozen.The owner will purchase 1 of 3 amounts of roses for Valentine's Day: 100,200,or 400 dozen roses.The opportunity loss for buying 400 dozen roses and selling 200 dozen roses at the full price is

For a potential investment of $5,000,a portfolio has an EMV of $1,000 and a standard deviation of $100.The return to risk ratio is

Blossom's Flowers purchases roses for sale for Valentine's Day.The roses are purchased for $10 a dozen and are sold for $20 a dozen.Any roses not sold on Valentine's Day can be sold for $5 per dozen.The owner will purchase 1 of 3 amounts of roses for Valentine's Day: 100,200,or 400 dozen roses.Given 0.2,0.4,and 0.4 are the probabilities for the sale of 100,200,or 400 dozen roses,respectively,then the optimal EMV for buying roses is

_____ is a procedure for revising probabilities based upon additional information.

SCENARIO 20-6 A student wanted to find out the optimal strategy to study for a Business Statistics exam with scores out of 100 possible points.He constructed the following payoff table based on the mean amount of time he needed to study every week for the course and the degree of difficulty of the exam.From the information that he gathered from students who had taken the course,he concluded that there was a 40% probability that the exam would be easy. -Referring to Scenario 20-6,what is the expected value of perfect information?

The minimum expected opportunity loss is also equal to

To calculate expected profit under certainty,you need to have perfect information about which event will occur.