Exam 11: Monte Carlo Simulation

The process of determining that a computer program implements a simulation model as it is intended is known as _____.

A description of the range and relative likelihood of possible values of an uncertain variable is known as a _____.

Which of the following is true of simulation optimization using Analytic Solver Platform (ASP)?

In a(n) _____ relationship between two quantities, either one quantity never increases as the other increases, or one quantity never decreases as the other increases.

A(n) _____ is an input to a simulation model whose value is uncertain and described by a probability distribution.

An input to a simulation model that is selected by the decision maker is known as a _____.

Sunseel Industries produces different types of raw materials and it is interested in using simulation to estimate the profit per unit for its new product X. The selling price for the product will be $40 per unit. Probability distributions for the raw material cost, the production cost, and the marketing cost are estimated as follows: a. Compute profit per unit for the base case, worst case, and best case. b. Construct a simulation model to estimate the mean profit per unit. c. Management believes the project may not be sustainable if the profit per unit is less than $2. Use simulation to estimate the probability the profit per unit will be less than $2.

In Excel, the expression LN(RAND())*(-m) would generate a(n) _____ random variable with mean m.

The process of evaluating a decision in the face of uncertainty by quantifying the likelihood and magnitude of an undesirable outcome is known as _____.

A specialty hedge fund is considering the purchase of a Jackson Pollock painting. It estimates the value of the painting to be $185 million. In an auction, both the number of competing bids and the amount of the competing bids is uncertain. The hedge fund has maintained a file summarizing 10 recent art auctions that it believes are similar to the upcoming auction. It is considering a bid of $163 million and would like to evaluate its chances of winning the upcoming auction with this bid. a. Construct a spreadsheet simulation model to determine the likelihood of the hedge fund winning the auction. Use a discrete uniform distribution between the minimum and maximum number of bidders in the 10 observed auctions to model the number of bidders in the Jackson Pollock auction. Fit a realistic distribution to the bid data to generate values of competing bid amounts. b. For a bid amount of $163 million, estimate the probability of the hedge fund winning the auction?

Salemach Corporation is a start-up company that manufactures simple machines. It is interested in analyzing the profit from a new machine. It estimates that the selling price will be $150 per unit and the setup and advertising costs will total $250,000. The company estimates that the per unit raw material cost is uniformly distributed between $50 and $80 and are equally likely. The demand is normally distributed with a mean of 12,000 units and a standard deviation of 3000 units. The probability distribution for a range of labor cost per unit is given below. a. Obtain estimates for the mean profit, maximum profit, minimum profit, and standard deviation of profit. b. What is your estimate of the probability of a loss?

ASP cannot guarantee an optimal solution to a simulation optimization model because

The stock price of Robin Tires, Inc., listed on the Stock Exchange is currently $20. The following probability distribution shows how the price per share is expected to change over a three-month period: a. Construct a spreadsheet simulation model that computes the value of the stock profit in 3 months, 6 months, 9 months, and 12 months under the assumption that the change in profit over any 3-month period is independent of the change in profit over any other 3-month period. b. With the current profit of $20 per share, simulate the profit per share for the next four 3-month periods. What is the average profit in 12 months? What is the standard deviation of the profit in 12 months?

The values for random variables in a Monte Carlo simulation are

According to the _____, the sum of independent random variables can be approximated by a normal probability distribution.

Team X is scheduled to play against Team Y in an upcoming game in Baseball's World Series. Assume that each player's point production can be represented as an integer uniform variable with the ranges provided in the following table: a. Develop a spreadsheet model that simulates the points scored by each team. b. What are the average and standard deviation of points scored by Team X? What is the shape of the distribution of points scored by Team X? c. What are the average and standard deviation of points scored by Team Y? What is the shape of the distribution of points scored by Team Y? d. Let Point Differential = Team X points - Team Y points. What is the average point differential between the two teams? What is the standard deviation in the point differential? What is the shape of the point differential distribution? e. What is the probability that the Team X scores more points than the Team Y?

All the values of computer-generated random numbers are_____.

A store is offering a discount on 800 pairs of basketball shoes. The amount of the discount varies and is not revealed to the customer until paying for the shoes. The distribution of discounts is given in the below table: How many pairs of shoes does a customer have to buy so that, on average, he has purchased five containing a 65% or 90% discount? (Hint: Use the hypergeometric distribution in ASP to answer this question.)

In simulation analysis, the _____ of random variables can be adjusted to determine the impact of the assumptions about the shape of the uncertainty on the results.

Which of the following parameters is required to convert a computer-generated random variable into a uniform random variable?