Question 1

In a decision analysis problem, variables (such as general macroeconomic conditions)which are not under the decision maker's control are called prior probabilities.

Accepted Answer

A) True 
 B)False  False

Question 2

Dan Hein owns the mineral and drilling rights to a 1,000 hectare tract of land.If he drills a well and does not strike oil his net loss will be $500,000, but if he drills a well and strikes oil his net gain will be $1,000,000.If he does not drill, his loss is the cost of the mineral and drilling rights, which amount to $10,000.The probability of the state of nature "oil in the tract" is unknown.If Dan is a pessimist, he would choose the ___.

Accepted Answer

A) maximin criterion 
B) maximax criterion 
C) Hurwicz criterion 
D) minimax regret strategy 
E) maximin regret strategy 
A) maximin criterion 
B) maximax criterion 
C) Hurwicz criterion 
D) minimax regret strategy 
E) maximin regret strategy A

Question 3

Trey Whitmore, Operations Manager at National Consumers, Inc.(NCI), is evaluating alternatives for increasing capacity at NCI's Fountain Hill plant.He has identified four alternatives, and has constructed the following payoff table which shows payoffs (in $1,000,000's)for the three possible levels of market demand:   If Trey uses the maximin criterion, the appropriate alternative would be: ___.

Accepted Answer

A) lease new equipment 
B) purchase new equipment 
C) add third shift 
D) do nothing 
E) do everything 
A) lease new equipment 
B) purchase new equipment 
C) add third shift 
D) do nothing 
E) do everything C

Question 4

Ray Crawford is evaluating investment alternatives to invest $500,000 which he inherited from his grandfather.His investment advisor has identified four alternatives and constructed the following payoff table which shows expected profits (in $10,000's)for various market conditions:   If Ray uses the Hurwicz criterion with alpha = 0.5, the appropriate choice is ___.

Accepted Answer

A) T-Bills 
B) Stocks 
C) Bonds 
D) Mixture 
E) none 
A) T-Bills 
B) Stocks 
C) Bonds 
D) Mixture 
E) none

Question 5

Ray Crawford is evaluating investment alternatives for the $1000,000 which he inherited from his grandfather.His investment advisor has identified two alternatives and constructed the following tables which show (1)expected profits (in $10,000's)for various market conditions and their probabilities, and (2)the advisor's track record on predicting Bull and Bear markets:   The EMV of this investment opportunity with the advisor's prediction is ___.

Accepted Answer

A) $167,379 
B) $174,200 
C) $153,900 
D) $136,700 
E) $140,011 
A) $167,379 
B) $174,200 
C) $153,900 
D) $136,700 
E) $140,011

Question 6

Ray Crawford is evaluating investment alternatives to invest $500,000 which he inherited from his grandfather.His investment advisor has identified four alternatives and constructed the following payoff table which shows expected profits (in $10,000's)for various market conditions:   The EMV of investing in Bonds is ___.

Accepted Answer

A) $30,000 
B) $63,000 
C) $78,000 
D) $81,000 
E) $100,000 
A) $30,000 
B) $63,000 
C) $78,000 
D) $81,000 
E) $100,000

Question 7

Ray Crawford is evaluating investment alternatives for the $1000,000 which he inherited from his grandfather.His investment advisor has identified two alternatives and constructed the following tables which show (1)expected profits (in $10,000's)for various market conditions and their probabilities, and (2)the advisor's track record on predicting Bull and Bear markets:   If the advisor predicts a Bull market the EMV of the Stocks alternative, using revised probabilities, is ___.

Accepted Answer

A) $168,900 
B) $207,650 
C) $157,300 
D) $306,000 
E) $134,650 
A) $168,900 
B) $207,650 
C) $157,300 
D) $306,000 
E) $134,650

Question 8

Ray Crawford is evaluating investment alternatives to invest $500,000 which he inherited from his grandfather.His investment advisor has identified four alternatives and constructed the following payoff table which shows expected profits (in $10,000)for various market conditions:   If Ray uses the maximax criterion, the appropriate choice would be ___.

Accepted Answer

A) T-Bills 
B) Stocks 
C) Bonds 
D) Mixture 
E) none 
A) T-Bills 
B) Stocks 
C) Bonds 
D) Mixture 
E) none

Question 9

Dan Hein owns the mineral and drilling rights to a 1,000 hectare tract of land.If he drills a well and does not strike oil his net loss will be $500,000, but if he drills a well and strikes oil his net gain will be $1,000,000.If he does not drill, his loss is the cost of the mineral and drilling rights, which amount to $10,000.The probability of the state of nature "oil in the tract" is unknown.If Dan is an optimist, he would choose the ___.

Accepted Answer

A) maximin criterion 
B) maximax criterion 
C) Hurwicz criterion 
D) minimax regret strategy 
E) maximin regret strategy 
A) maximin criterion 
B) maximax criterion 
C) Hurwicz criterion 
D) minimax regret strategy 
E) maximin regret strategy

Question 10

Ray Crawford is evaluating investment alternatives to invest $500,000 which he inherited from his grandfather.His investment advisor has identified four alternatives and constructed the following payoff table which shows expected profits (in $10,000's)for various market conditions:   If Ray uses the maximin criterion, the appropriate choice would be ___.

Accepted Answer

A) T-Bills 
B) Stocks 
C) Bonds 
D) Mixture 
E) none 
A) T-Bills 
B) Stocks 
C) Bonds 
D) Mixture 
E) none

Question 11

In decision-making under uncertainty, an optimistic approach is the ___.

Accepted Answer

A) maximin criterion 
B) maximax criterion 
C) Hurwicz criterion 
D) minimax regret strategy 
E) maximin regret strategy 
A) maximin criterion 
B) maximax criterion 
C) Hurwicz criterion 
D) minimax regret strategy 
E) maximin regret strategy

Question 12

Trey Whitmore, Operations Manager at National Consumers, Inc.(NCI), is evaluating alternatives for increasing capacity at NCI's Fountain Hill plant.He has identified four alternatives, and has constructed the following payoff table which shows payoffs (in $1,000,000's)for the three possible levels of market demand:   If Trey uses the Hurwicz criterion with alpha = 0.4, the appropriate alternative would be: ___.

Accepted Answer

A) lease new equipment 
B) purchase new equipment 
C) add third shift 
D) do nothing 
E) do everything 
A) lease new equipment 
B) purchase new equipment 
C) add third shift 
D) do nothing 
E) do everything

Question 13

Dan Hein owns the mineral and drilling rights to a 1,000 hectare tract of land.If he drills a well and does not strike oil his net loss will be $500,000, but if he drills a well and strikes oil his net gain will be $1,000,000.If he does not drill, his loss is the cost of the mineral and drilling rights, which amount to $10,000.For Dan's decision problem, the variable "drill the well" is one of the ___.

Accepted Answer

A) payoffs 
B) decision alternatives 
C) states of nature 
D) revised probabilities 
E) prior probabilities 
A) payoffs 
B) decision alternatives 
C) states of nature 
D) revised probabilities 
E) prior probabilities

Question 14

Dianna Young is evaluating a plan to expand the production facilities of International Compressors Company which manufactures natural gas compressors.Dianna feels that the price of coal is a significant factor in her decision.She can estimate how much the company would make under various prices of coal.If Dianna is making her decision under certainty, then she knows the ___________.

Accepted Answer

A) profit possible under various prices of coal 
B) whether the company will expand its production facilities 
C) future price of coal 
D) what decisions will be made at each point 
E) future state of the economy 
A) profit possible under various prices of coal 
B) whether the company will expand its production facilities 
C) future price of coal 
D) what decisions will be made at each point 
E) future state of the economy

Question 15

In a decision-making under uncertainty scenario, the best decision alternative based on the strategy of minmax regret will always have zero regret.

Accepted Answer

A) True 
 B)False

Question 16

Consider the following decision table with rewards in $ millions.   The opportunity loss for the combination "S2" and "d1" is ___.

Accepted Answer

A) 9 
B) 5 
C) 3 
D) 0 
E) -1 
A) 9 
B) 5 
C) 3 
D) 0 
E) -1

Question 17

Trey Whitmore, Operations Manager at National Consumers, Inc.(NCI), is evaluating alternatives for increasing capacity at NCI's Fountain Hill plant.He has identified four alternatives, and has constructed the following payoff table which shows payoffs (in $1,000,000's)for the three possible levels of market demand:   The opportunity loss for the combination "Purchase New Equipment" and "Low" is ___.

Accepted Answer

A) 0.5 
B) 1.5 
C) 2.5 
D) 3.0 
E) 3.5 
A) 0.5 
B) 1.5 
C) 2.5 
D) 3.0 
E) 3.5

Question 18

Melissa Rossi, Product Manager at National Consumers, Inc.(NCI), is evaluating alternatives for introducing a new brand of toothpaste with an improved formula to promote teeth whitening.She has identified four alternative markets, and has constructed the following table which shows NCI's rewards (in $1,000,000's)for various levels of acceptance by the markets and their probabilities:   The expected monetary payoff with perfect information is ___.

Accepted Answer

A) $570,000 
B) $680,000 
C) $760,000 
D) $830,000 
E) $980,000 
A) $570,000 
B) $680,000 
C) $760,000 
D) $830,000 
E) $980,000

Question 19

In a decision-making under risk scenario, the expected monetary value of a decision alternative is the arithmetic average of the payoffs to the decision alternative in each state of the nature.

Accepted Answer

A) True 
 B)False

Question 20

In a decision analysis problem, variables (such as investing in common stocks or corporate bonds)which are under the decision maker's control are called ___.

Accepted Answer

A) payoffs 
B) decision alternatives 
C) states of nature 
D) revised probabilities 
E) prior probabilities 
A) payoffs 
B) decision alternatives 
C) states of nature 
D) revised probabilities 
E) prior probabilities

In a decision analysis problem, variables (such as general macroeconomic conditions)which are not under the decision maker's control are called prior probabilities.

In decision-making under uncertainty, an optimistic approach is the ___.

In a decision-making under uncertainty scenario, the best decision alternative based on the strategy of minmax regret will always have zero regret.

Consider the following decision table with rewards in $ millions. The opportunity loss for the combination "S₂" and "d₁" is ___.

In a decision-making under risk scenario, the expected monetary value of a decision alternative is the arithmetic average of the payoffs to the decision alternative in each state of the nature.

In a decision analysis problem, variables (such as investing in common stocks or corporate bonds)which are under the decision maker's control are called ___.

Introduction to Statistics

Charts and Graphs

Descriptive Statistics

Probability

Discrete Distributions

Continuous Distributions

Sampling and Sampling Distributions

Statistical Inference: Estimation for Single Populations

Statistical Inference: Hypothesis Testing for Single Populations

Statistical Inferences About Two Populations

Analysis of Variance and Design of Experiments

Simple Regression Analysis and Correlation

Multiple Regression Analysis

Building Multiple Regression Models

Time-Series Forecasting and Index Numbers

Analysis of Categorical Data

Nonparametric Statistics

Statistical Quality Control

Filters

Exam 19: Decision Analysis

In a decision analysis problem, variables (such as general macroeconomic conditions)which are not under the decision maker's control are called prior probabilities.

In decision-making under uncertainty, an optimistic approach is the ___.

In a decision-making under uncertainty scenario, the best decision alternative based on the strategy of minmax regret will always have zero regret.

Consider the following decision table with rewards in $ millions. The opportunity loss for the combination "S2" and "d1" is ___.

In a decision-making under risk scenario, the expected monetary value of a decision alternative is the arithmetic average of the payoffs to the decision alternative in each state of the nature.

In a decision analysis problem, variables (such as investing in common stocks or corporate bonds)which are under the decision maker's control are called ___.

Introduction to Statistics

Charts and Graphs

Descriptive Statistics

Probability

Discrete Distributions

Continuous Distributions

Sampling and Sampling Distributions

Statistical Inference: Estimation for Single Populations

Statistical Inference: Hypothesis Testing for Single Populations

Statistical Inferences About Two Populations

Analysis of Variance and Design of Experiments

Simple Regression Analysis and Correlation

Multiple Regression Analysis

Building Multiple Regression Models

Time-Series Forecasting and Index Numbers

Analysis of Categorical Data

Nonparametric Statistics

Statistical Quality Control

Filters

Consider the following decision table with rewards in $ millions. The opportunity loss for the combination "S₂" and "d₁" is ___.