Question 1

A payoff

Accepted Answer

A)  is always measured in profit. 
B)  is always measured in cost. 
C)  exists for each pair of decision alternative and state of nature. 
D)  exists for each state of nature. 
A)  is always measured in profit. 
B)  is always measured in cost. 
C)  exists for each pair of decision alternative and state of nature. 
D)  exists for each state of nature.

Question 2

​The primary value of decision trees is as a useful way of organizing how operations managers think about complex multiphase decisions.

Accepted Answer

A) True 
 B)False

Question 3

​The utility function for a risk avoider typically shows a diminishing marginal return for money.

Accepted Answer

A) True 
 B)False

Question 4

​The risk premium is never negative for a conservative decision maker.

Accepted Answer

A) True 
 B)False

Question 5

​The expected monetary value approach and the expected utility approach to decision making usually result in the same decision choice unless extreme payoffs are involved.

Accepted Answer

A) True 
 B)False

Question 6

​The expected utility approach

Accepted Answer

A)  ​does not require probabilities. 
B)  ​leads to the same decision as the expected value approach. 
C)  ​is most useful when excessively large or small payoffs are possible. 
D)  ​requires a decision tree. 
A)  ​does not require probabilities. 
B)  ​leads to the same decision as the expected value approach. 
C)  ​is most useful when excessively large or small payoffs are possible. 
D)  ​requires a decision tree.

Question 7

​When monetary value is not the sole measure of the true worth of the outcome to the decision maker, monetary value should be replaced by utility.

Accepted Answer

A) True 
 B)False

Question 8

​When the expected value approach is used to select a decision alternative, the payoff that actually occurs will usually have a value different from the expected value.

Accepted Answer

A) True 
 B)False

Question 9

​Utility reflects the decision maker's attitude toward

Accepted Answer

A)  ​probability and profit. 
B)  ​profit, loss, and risk. 
C)  ​risk and regret. 
D)  ​probability and regret. 
A)  ​probability and profit. 
B)  ​profit, loss, and risk. 
C)  ​risk and regret. 
D)  ​probability and regret.

Question 10

EVPI equals the expected regret associated with the minimax decision.

Accepted Answer

A) True 
 B)False

Question 11

For a minimization 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 12

​Give two examples of situations where you have decided on a course of action that did not have the highest expected monetary value.

Accepted Answer

One example of a situation where I decid

Question 13

​When the payoffs become extreme, most decision makers are satisfied with the decision that provides the best expected monetary value.

Accepted Answer

A) True 
 B)False

Question 14

​The purchase of insurance and lottery tickets shows that people make decisions based on

Accepted Answer

A)  ​expected value. 
B)  ​sample information. 
C)  ​utility. 
D)  ​maximum likelihood. 
A)  ​expected value. 
B)  ​sample information. 
C)  ​utility. 
D)  ​maximum likelihood.

Question 15

The expected value approach is more appropriate for a one-time decision than a repetitive decision.

Accepted Answer

A) True 
 B)False

Question 16

Decision alternatives are structured so that several could occur simultaneously.

Accepted Answer

A) True 
 B)False

Question 17

States of nature should be defined so that one and only one will actually occur.

Accepted Answer

A) True 
 B)False

Question 18

East West Distributing is in the process of trying to determine where they should schedule next year's production of a popular line of kitchen utensils that they distribute. Manufacturers in four different countries have submitted bids to East West. However, a pending trade bill in Congress will greatly affect the cost to East West due to proposed tariffs, favorable trading status, etc.
After careful analysis, East West has determined the following cost breakdown for the four manufacturers (in $1,000's) based on whether or not the trade bill passes:   ​ 
a.
If East West estimates that there is a 40% chance of the bill passing, which country should they choose for manufacturing?
b.
Over what range of values for the "bill passing" will the solution in part (a) remain optimal?

Accepted Answer

​
a.Using EV approach: EV(A) =

Question 19

Three decision makers have assessed utilities for the problem whose payoff table appears below.
​   ​   ​ 
a.Plot the utility function for each decision maker.
b.Characterize each decision maker's attitude toward risk.
c.Which decision will each person prefer?​

Accepted Answer

​
a. Risk Taker -- Second Vice

Question 20

​Decision tree probabilities refer to the probability of

Accepted Answer

A)  ​an uncertain event occurring. 
B)  ​the decision being made. 
C)  ​finding an optimal value. 
D)  ​overlooked choices. 
A)  ​an uncertain event occurring. 
B)  ​the decision being made. 
C)  ​finding an optimal value. 
D)  ​overlooked choices.

A payoff

The primary value of decision trees is as a useful way of organizing how operations managers think about complex multiphase decisions.

The utility function for a risk avoider typically shows a diminishing marginal return for money.

The risk premium is never negative for a conservative decision maker.

The expected monetary value approach and the expected utility approach to decision making usually result in the same decision choice unless extreme payoffs are involved.

The expected utility approach

When monetary value is not the sole measure of the true worth of the outcome to the decision maker, monetary value should be replaced by utility.

When the expected value approach is used to select a decision alternative, the payoff that actually occurs will usually have a value different from the expected value.

Utility reflects the decision maker's attitude toward

EVPI equals the expected regret associated with the minimax decision.

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

Give two examples of situations where you have decided on a course of action that did not have the highest expected monetary value.

When the payoffs become extreme, most decision makers are satisfied with the decision that provides the best expected monetary value.

The purchase of insurance and lottery tickets shows that people make decisions based on

The expected value approach is more appropriate for a one-time decision than a repetitive decision.

Decision alternatives are structured so that several could occur simultaneously.

States of nature should be defined so that one and only one will actually occur.

Three decision makers have assessed utilities for the problem whose payoff table appears below. a.Plot the utility function for each decision maker. b.Characterize each decision maker's attitude toward risk. c.Which decision will each person prefer?

Decision tree probabilities refer to the probability of

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

A payoff

​The primary value of decision trees is as a useful way of organizing how operations managers think about complex multiphase decisions.

​The utility function for a risk avoider typically shows a diminishing marginal return for money.

​The risk premium is never negative for a conservative decision maker.

​The expected monetary value approach and the expected utility approach to decision making usually result in the same decision choice unless extreme payoffs are involved.

​The expected utility approach

​When monetary value is not the sole measure of the true worth of the outcome to the decision maker, monetary value should be replaced by utility.

​When the expected value approach is used to select a decision alternative, the payoff that actually occurs will usually have a value different from the expected value.

​Utility reflects the decision maker's attitude toward

EVPI equals the expected regret associated with the minimax decision.

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

​Give two examples of situations where you have decided on a course of action that did not have the highest expected monetary value.

​When the payoffs become extreme, most decision makers are satisfied with the decision that provides the best expected monetary value.

​The purchase of insurance and lottery tickets shows that people make decisions based on

The expected value approach is more appropriate for a one-time decision than a repetitive decision.

Decision alternatives are structured so that several could occur simultaneously.

States of nature should be defined so that one and only one will actually occur.

Three decision makers have assessed utilities for the problem whose payoff table appears below. ​ ​ ​ a.Plot the utility function for each decision maker. b.Characterize each decision maker's attitude toward risk. c.Which decision will each person prefer?​

​Decision tree probabilities refer to the probability of

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

The primary value of decision trees is as a useful way of organizing how operations managers think about complex multiphase decisions.

The utility function for a risk avoider typically shows a diminishing marginal return for money.

The risk premium is never negative for a conservative decision maker.

The expected monetary value approach and the expected utility approach to decision making usually result in the same decision choice unless extreme payoffs are involved.

The expected utility approach

When monetary value is not the sole measure of the true worth of the outcome to the decision maker, monetary value should be replaced by utility.

When the expected value approach is used to select a decision alternative, the payoff that actually occurs will usually have a value different from the expected value.

Utility reflects the decision maker's attitude toward

Give two examples of situations where you have decided on a course of action that did not have the highest expected monetary value.

When the payoffs become extreme, most decision makers are satisfied with the decision that provides the best expected monetary value.

The purchase of insurance and lottery tickets shows that people make decisions based on

Three decision makers have assessed utilities for the problem whose payoff table appears below. a.Plot the utility function for each decision maker. b.Characterize each decision maker's attitude toward risk. c.Which decision will each person prefer?

Decision tree probabilities refer to the probability of