Question 1

Why perform sensitivity analysis? Of what use is sensitivity analysis where good probability estimates are difficult to obtain?

Accepted Answer

Sensitivity analysis is a crucial techni

Question 2

Fold back the decision tree and state what strategy should be followed.
​

Accepted Answer

​ @#IMG-DLM& ​
Strategy: Select A. If C

Question 3

The table shows both prospective profits and losses for a company, depending on what decision is made and what state of nature occurs. Use the information to determine what the company should do.
​​   ​ 
a.
if an optimistic strategy is used.
b.
if a conservative strategy is used.
c.
if minimax regret is the strategy.

Accepted Answer

The answer of The table shows both prospective profits and...

Question 4

Maximizing the expected payoff and minimizing the expected opportunity loss result in the same recommended decision.

Accepted Answer

A) True 
 B)False

Question 5

​Which of the following is not an advantage of using decision tree analysis?

Accepted Answer

A)  ​the ability to see clearly what decisions must be made 
B)  ​the ability to see clearly in what sequence the decisions must occur 
C)  ​the ability to see clearly the interdependence of decisions 
D)  ​the ability to see clearly the future outcome of a decision 
A)  ​the ability to see clearly what decisions must be made 
B)  ​the ability to see clearly in what sequence the decisions must occur 
C)  ​the ability to see clearly the interdependence of decisions 
D)  ​the ability to see clearly the future outcome of a decision

Question 6

​The decision alternative with the best expected monetary value will always be the most desirable decision.

Accepted Answer

A) True 
 B)False

Question 7

An appliance dealer must decide how many (if any) new microwave ovens to order for next month. The ovens cost $220 and sell for $300. Because the oven company is coming out with a new product line in two months, any ovens not sold next month will have to be sold at the dealer's half price clearance sale. Additionally, the appliance dealer feels he suffers a loss of $25 for every oven demanded when he is out of stock. On the basis of past months' sales data, the dealer estimates the probabilities of monthly demand (D) for 0, 1, 2, or 3 ovens to be .3, .4, .2, and .1, respectively.
The dealer is considering conducting a telephone survey on the customers' attitudes towards microwave ovens. The results of the survey will either be favorable (F), unfavorable (U) or no opinion (N). The dealer's probability estimates for the survey results based on the number of units demanded are:   ​ 
a.
What is the dealer's optimal decision without conducting the survey?
b.
What is the EVPI?
c.
Based on the survey results what is the optimal decision strategy for the dealer?
d.
What is the maximum amount he should pay for this survey?

Accepted Answer

​ @#IMG-DLM& ​
a.Order one oven: EV = $2

Question 8

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

Accepted Answer

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

Question 9

​The risk neutral decision maker will have the same indications from the expected value and expected utility approaches.

Accepted Answer

A) True 
 B)False

Question 10

​A decision maker whose utility function graphs as a straight line is

Accepted Answer

A)  ​conservative. 
B)  ​a risk taker. 
C)  ​risk neutral. 
D)  ​a risk avoider. 
A)  ​conservative. 
B)  ​a risk taker. 
C)  ​risk neutral. 
D)  ​a risk avoider.

Question 11

​Expected utility is a particularly useful tool when payoffs stay in a range considered reasonable by the decision maker.

Accepted Answer

A) True 
 B)False

Question 12

The expected value of an alternative can never be negative.

Accepted Answer

A) True 
 B)False

Question 13

​The outcome with the highest payoff will also have the highest utility.

Accepted Answer

A) True 
 B)False

Question 14

​When and why should a utility approach be followed?

Accepted Answer

A utility approach should be followed wh

Question 15

The options from which a decision maker chooses a course of action are

Accepted Answer

A)  called the decision alternatives. 
B)  under the control of the decision maker. 
C)  not the same as the states of nature. 
D)  All of the alternatives are true. 
A)  called the decision alternatives. 
B)  under the control of the decision maker. 
C)  not the same as the states of nature. 
D)  All of the alternatives are true.

Question 16

​Explain the relationship between expected utility, probability, payoff, and utility.

Accepted Answer

Expected utility, probability, payoff, a

Question 17

A decision strategy is a sequence of decisions and chance outcomes, where the decisions chosen depend on the yet to be determined outcomes of chance events.

Accepted Answer

A) True 
 B)False

Question 18

​A decision tree provides

Accepted Answer

A)  ​a heuristic method for analyzing decisions. 
B)  ​a deterministic approach to decision analysis. 
C)  ​the absolute value of the decision. 
D)  ​an objective way of determining the relative value of each decision alternative. 
A)  ​a heuristic method for analyzing decisions. 
B)  ​a deterministic approach to decision analysis. 
C)  ​the absolute value of the decision. 
D)  ​an objective way of determining the relative value of each decision alternative.

Question 19

Square nodes in a decision tree indicate that a decision must be made.

Accepted Answer

A) True 
 B)False

Question 20

Making a good decision

Accepted Answer

A)  requires probabilities for all states of nature. 
B)  requires a clear understanding of decision alternatives, states of nature, and payoffs. 
C)  implies that a desirable outcome will occur. 
D)  All of the alternatives are true. 
A)  requires probabilities for all states of nature. 
B)  requires a clear understanding of decision alternatives, states of nature, and payoffs. 
C)  implies that a desirable outcome will occur. 
D)  All of the alternatives are true.

Why perform sensitivity analysis? Of what use is sensitivity analysis where good probability estimates are difficult to obtain?

Fold back the decision tree and state what strategy should be followed.

Maximizing the expected payoff and minimizing the expected opportunity loss result in the same recommended decision.

Which of the following is not an advantage of using decision tree analysis?

The decision alternative with the best expected monetary value will always be the most desirable decision.

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

The risk neutral decision maker will have the same indications from the expected value and expected utility approaches.

A decision maker whose utility function graphs as a straight line is

Expected utility is a particularly useful tool when payoffs stay in a range considered reasonable by the decision maker.

The expected value of an alternative can never be negative.

The outcome with the highest payoff will also have the highest utility.

When and why should a utility approach be followed?

The options from which a decision maker chooses a course of action are

Explain the relationship between expected utility, probability, payoff, and utility.

A decision strategy is a sequence of decisions and chance outcomes, where the decisions chosen depend on the yet to be determined outcomes of chance events.

A decision tree provides

Square nodes in a decision tree indicate that a decision must be made.

Making a good decision

Introduction

An Introduction to Linear Programming

Linear Programming: Sensitivity Analysis and Interpretation of Solution

Linear Programming Applications in Marketing, Finance, and Operations Management

Advanced Linear Programming Applications

Distribution and Network Models

Integer Linear Programming

Nonlinear Optimization Models

Project Scheduling: Pertcpm

Inventory Models

Waiting Line Models

Simulation

Multicriteria Decisions

Time Series Analysis and Forecasting

Markov Processes

Linear Programming: Simplex Method

Simplex-Based Sensitivity Analysis and Duality

Solution Procedures for Transportation and Assignment Problems

Minimal Spanning Tree

Dynamic Programming

Filters

Exam 13: Decision Analysis

Why perform sensitivity analysis? Of what use is sensitivity analysis where good probability estimates are difficult to obtain?

Fold back the decision tree and state what strategy should be followed. ​

Maximizing the expected payoff and minimizing the expected opportunity loss result in the same recommended decision.

​Which of the following is not an advantage of using decision tree analysis?

​The decision alternative with the best expected monetary value will always be the most desirable decision.

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

​The risk neutral decision maker will have the same indications from the expected value and expected utility approaches.

​A decision maker whose utility function graphs as a straight line is

​Expected utility is a particularly useful tool when payoffs stay in a range considered reasonable by the decision maker.

The expected value of an alternative can never be negative.

​The outcome with the highest payoff will also have the highest utility.

​When and why should a utility approach be followed?

The options from which a decision maker chooses a course of action are

​Explain the relationship between expected utility, probability, payoff, and utility.

A decision strategy is a sequence of decisions and chance outcomes, where the decisions chosen depend on the yet to be determined outcomes of chance events.

​A decision tree provides

Square nodes in a decision tree indicate that a decision must be made.

Making a good decision

Introduction

An Introduction to Linear Programming

Linear Programming: Sensitivity Analysis and Interpretation of Solution

Linear Programming Applications in Marketing, Finance, and Operations Management

Advanced Linear Programming Applications

Distribution and Network Models

Integer Linear Programming

Nonlinear Optimization Models

Project Scheduling: Pertcpm

Inventory Models

Waiting Line Models

Simulation

Multicriteria Decisions

Time Series Analysis and Forecasting

Markov Processes

Linear Programming: Simplex Method

Simplex-Based Sensitivity Analysis and Duality

Solution Procedures for Transportation and Assignment Problems

Minimal Spanning Tree

Dynamic Programming

Filters

Fold back the decision tree and state what strategy should be followed.

Which of the following is not an advantage of using decision tree analysis?

The decision alternative with the best expected monetary value will always be the most desirable decision.

The risk neutral decision maker will have the same indications from the expected value and expected utility approaches.

A decision maker whose utility function graphs as a straight line is

Expected utility is a particularly useful tool when payoffs stay in a range considered reasonable by the decision maker.

The outcome with the highest payoff will also have the highest utility.

When and why should a utility approach be followed?

Explain the relationship between expected utility, probability, payoff, and utility.

A decision tree provides