Question 1

If a decision maker knows for sure which state of nature will occur, he/she is making a decision under certainty.

Accepted Answer

A) True 
 B)False  True

Question 2

A toy manufacturer has three different mechanisms that can be installed in a doll that it sells. The different mechanisms have three different setup costs (overheads) and variable costs and, therefore, the profit from the dolls is dependent on the volume of sales. The anticipated payoffs are as follows.
   (a) What is the EMV of each decision alternative?
(b) Which action should be selected?
(c) What is the expected value with perfect information?
(d) What is the expected value of perfect information?

Accepted Answer

(a) Wind-up = .1($325,000) + .3($190,000) + .6($170,000) = $191,500; Pneumatic = .1($300,000) + .3($420,000) + .6($400,000) = $396,000; and Electrical = .1(-$600,000) + .3($240,000) + .6($800,000) = $492,000. (b) Electrical has the best EMV, at $492,000. (c) EVwPI is .1($325,000) + .3($420,000) + .6($800,000) = $638,500; (d) EVPI = $638,500 - $492,000 = $146,500.

Question 3

Which of the following options has the maximum EMV?

Accepted Answer

A)  Option 1 
B)  Option 2 
C)  Option 3 
D)  Option 4 
E)  Option 5 
A)  Option 1 
B)  Option 2 
C)  Option 3 
D)  Option 4 
E)  Option 5 D

Question 4

In terms of decision theory, an occurrence or situation over which the decision maker has no control is called a(n):

Accepted Answer

A)  decision under uncertainty. 
B)  decision tree. 
C)  state of nature. 
D)  alternative. 
E)  EMV. 
A)  decision under uncertainty. 
B)  decision tree. 
C)  state of nature. 
D)  alternative. 
E)  EMV.

Question 5

The EMV of a decision with three states of nature is $33,000. If the profit/value under the states of nature A, B, and C is $10,000, $20,000, and $50,000, respectively, and states B and C have equal probabilities, determine the likelihood of state of nature A.

Accepted Answer

Let Y = the probability of state of natu

Question 6

An operations manager's staff has compiled the information below for four manufacturing alternatives (A, B, C, and
D) that vary by production technology and the capacity of the machinery. All choices enable the same level of total production and have the same lifetime. The four states of nature represent four levels of consumer acceptance of the firm's products. Values in the table are net present value of future profits in millions of dollars.
   
(a) Assuming a maximax strategy, which alternative would be chosen?
(b) If maximin were used, which would be chosen?
(c) If the states of nature were equally likely, which alternative should be chosen?

Accepted Answer

(a) The maximax strategy selects the bes

Question 7

A retailer is deciding how many units of a certain product to stock. The historical probability distribution of sales for this product is 0 units, 0.2; 1 unit, 0.3; 2 units, 0.4, and 3 units, 0.1. The product costs $11 per unit and sells for $25 per unit. What is the conditional value for the decision alternative "Stock 3" and state of nature "Sell 1"?

Accepted Answer

A)  1.4 units 
B)  $1 profit 
C)  $25 profit 
D)  $-8 profit 
E)  $23.80 profit 
A)  1.4 units 
B)  $1 profit 
C)  $25 profit 
D)  $-8 profit 
E)  $23.80 profit

Question 8

The construction manager for Acme Construction, Inc. must decide whether to build single family homes, apartments, or condominiums. This is not a product-mix problem, but an all-or-nothing decision. He will hire workers and rent equipment appropriate for one action only. He estimates annual profits (in thousands of dollars) will vary with population trends as follows:
   (a) If he uses the maximin criterion, which type of dwellings will he choose to build? Show your supporting calculations.
(b) If he uses the equally likely criterion, which kind of dwellings will he choose to build? Show your supporting calculations.
(c) If the construction manager were an optimist, what criterion would he choose? What would be the choice of dwelling for that criterion? Show your supporting calculations.

Accepted Answer

(a) The pessimistic maximin criterion as

Question 9

Earl Shell owns his own Sno-Cone business and lives 30 miles from a beach resort. The sale of Sno-Cones is highly dependent upon his location and upon the weather. At the resort, he will profit $120 per day in fair weather, $10 per day in bad weather. At home, he will profit $70 in fair weather, $55 in bad weather. Assume that on any particular day, the weather service suggests a 40% chance of foul weather.
(a) Construct Earl's decision tree.
(b) What decision is recommended by the expected value criterion?

Accepted Answer

Resort has

Question 10

Identify, in order, the six steps of analytical decision making.

Accepted Answer

1. Clearly define the problem and factor

Question 11

________ is the difference between the payoff under perfect information and the payoff under risk.

Accepted Answer

Expected v

Question 12

In the context of decision-making, define an alternative.

Accepted Answer

An alternative is a

Question 13

A toy manufacturer makes stuffed kittens and puppies that have relatively lifelike motions. There are three different mechanisms which can be installed in these "pets." These toys will sell for the same price regardless of the mechanism installed, but each mechanism has its own variable cost and setup cost. Profit, therefore, is dependent upon the choice of mechanism and upon the level of demand. The manufacturer has in hand a forecast of demand that suggests a 0.2 probability of light demand, a 0.45 probability of moderate demand, and a probability of 0.35 of heavy demand. Payoffs for each mechanism-demand combination appear in the table below.
   Construct the appropriate decision tree to analyze this problem. Use standard symbols for the tree. Analyze the tree to select the optimal decision for the manufacturer.

Accepted Answer

@#IMG-DLM& The best

Question 14

What is the EMV for Option 2 in the following decision table?

Accepted Answer

A)  50 
B)  100 
C)  170 
D)  200 
E)  350 
A)  50 
B)  100 
C)  170 
D)  200 
E)  350

Question 15

The first step, and a key element, in the decision-making process is to:

Accepted Answer

A)  consult a specialist. 
B)  clearly define the problem. 
C)  develop objectives. 
D)  monitor the results. 
E)  select the best alternative. 
A)  consult a specialist. 
B)  clearly define the problem. 
C)  develop objectives. 
D)  monitor the results. 
E)  select the best alternative.

Question 16

The maximin criterion is optimistic, while the maximax criterion is pessimistic.

Accepted Answer

A) True 
 B)False

Question 17

________ is the expected payout or value of a variable that has different possible states of nature, each with an associated probability.

Accepted Answer

Expected m

Question 18

Which of the following is NOT considered a step in the decision-making process?

Accepted Answer

A)  Clearly define the problem and the factors that influence it. 
B)  Select the best alternative. 
C)  Develop specific and measurable objectives. 
D)  Evaluate each alternative solution based on its merits and drawbacks. 
E)  Minimize costs whenever possible. 
A)  Clearly define the problem and the factors that influence it. 
B)  Select the best alternative. 
C)  Develop specific and measurable objectives. 
D)  Evaluate each alternative solution based on its merits and drawbacks. 
E)  Minimize costs whenever possible.

Question 19

What is a conditional value?

Accepted Answer

It is an outcome of

Question 20

All EXCEPT which of the following steps are taken to analyze problems with decision trees?

Accepted Answer

A)  Define the problem. 
B)  Structure or draw the decision tree. 
C)  Assign probabilities to the alternatives. 
D)  Estimate payoffs for each possible alternative/state of nature combination. 
E)  Solve the problem by computing expected monetary values for each state-of-nature node. 
A)  Define the problem. 
B)  Structure or draw the decision tree. 
C)  Assign probabilities to the alternatives. 
D)  Estimate payoffs for each possible alternative/state of nature combination. 
E)  Solve the problem by computing expected monetary values for each state-of-nature node.

If a decision maker knows for sure which state of nature will occur, he/she is making a decision under certainty.

Which of the following options has the maximum EMV?

In terms of decision theory, an occurrence or situation over which the decision maker has no control is called a(n):

The EMV of a decision with three states of nature is $33,000. If the profit/value under the states of nature A, B, and C is $10,000, $20,000, and $50,000, respectively, and states B and C have equal probabilities, determine the likelihood of state of nature A.

Identify, in order, the six steps of analytical decision making.

________ is the difference between the payoff under perfect information and the payoff under risk.

In the context of decision-making, define an alternative.

What is the EMV for Option 2 in the following decision table?

The first step, and a key element, in the decision-making process is to:

The maximin criterion is optimistic, while the maximax criterion is pessimistic.

________ is the expected payout or value of a variable that has different possible states of nature, each with an associated probability.

Which of the following is NOT considered a step in the decision-making process?

What is a conditional value?

All EXCEPT which of the following steps are taken to analyze problems with decision trees?

Operations and Productivity

Operations Strategy in a Global Environment

Project Management

Forecasting

Design of Goods and Services

Managing Quality

Process Strategies

Location Strategies

Human Resources, Job Design, and Work Measurement

Supply Chain Management

Inventory Management

Aggregate Planning and Sop

Material Requirements Planning Mrp and Erp

Short-Term Scheduling

Lean Operations

Maintenance and Reliability

Linear Programming

Transportation Models

Waiting-Line Models

Learning Curves

Simulation

Applying Analytics to Big Data in Operations Management

Filters

Exam 17: Decision-Making Tools

If a decision maker knows for sure which state of nature will occur, he/she is making a decision under certainty.

Which of the following options has the maximum EMV?

In terms of decision theory, an occurrence or situation over which the decision maker has no control is called a(n):

The EMV of a decision with three states of nature is $33,000. If the profit/value under the states of nature A, B, and C is $10,000, $20,000, and $50,000, respectively, and states B and C have equal probabilities, determine the likelihood of state of nature A.

Identify, in order, the six steps of analytical decision making.

________ is the difference between the payoff under perfect information and the payoff under risk.

In the context of decision-making, define an alternative.

What is the EMV for Option 2 in the following decision table?

The first step, and a key element, in the decision-making process is to:

The maximin criterion is optimistic, while the maximax criterion is pessimistic.

________ is the expected payout or value of a variable that has different possible states of nature, each with an associated probability.

Which of the following is NOT considered a step in the decision-making process?

What is a conditional value?

All EXCEPT which of the following steps are taken to analyze problems with decision trees?

Operations and Productivity

Operations Strategy in a Global Environment

Project Management

Forecasting

Design of Goods and Services

Managing Quality

Process Strategies

Location Strategies

Human Resources, Job Design, and Work Measurement

Supply Chain Management

Inventory Management

Aggregate Planning and Sop

Material Requirements Planning Mrp and Erp

Short-Term Scheduling

Lean Operations

Maintenance and Reliability

Linear Programming

Transportation Models

Waiting-Line Models

Learning Curves

Simulation

Applying Analytics to Big Data in Operations Management

Filters