Question 1

​At a fair carnival roulette wheel,a player can either win $10,$30,or $80.If it costs $30 to play,would an individual gain or lose from playing the game?

Accepted Answer

A) ​Gain 
B) Lose 
C) Breakeven-neither gain nor lose 
D) ​None of the above 
A) ​Gain 
B) Lose 
C) Breakeven-neither gain nor lose 
D) ​None of the above

Question 2

​In a coin toss bet,where both heads and tails are equally likely,you win a $2 on heads but lose $1 on tails.The expected value of the bet is

Accepted Answer

A) ​$0.50 
B) -$0.50 
C) $1.00 
D) ​$0.00 
A) ​$0.50 
B) -$0.50 
C) $1.00 
D) ​$0.00

Question 3

​You are considering buying a store.The storeowner gives you an estimate of the net profits of the store on a typical day.The owner has most likely given you the figures for the day when

Accepted Answer

A) ​Sales are low,costs are high 
B) Sales are very close to costs 
C) Sales are high,costs are low 
D) ​All of the above 
A) ​Sales are low,costs are high 
B) Sales are very close to costs 
C) Sales are high,costs are low 
D) ​All of the above

Question 4

​At a carnival roulette wheel,a player can either win $10,$30,or $80.If it costs $50 to play,we would expect to see

Accepted Answer

A) ​A long line of players waiting to play 
B) No players for the game 
C) The carnival losing money per play 
D) ​All of the above 
A) ​A long line of players waiting to play 
B) No players for the game 
C) The carnival losing money per play 
D) ​All of the above

Question 5

​You are considering buying a store.The storeowner gives you an estimate of the net profits of the store on a typical day.The owner has most likely given you the figures for

Accepted Answer

A) ​The best case scenario 
B) The worst case scenario 
C) Any typical day 
D) ​Any typical year 
A) ​The best case scenario 
B) The worst case scenario 
C) Any typical day 
D) ​Any typical year

Question 6

​Type II errors are

Accepted Answer

A) ​False negatives 
B) False positives 
C) True negatives 
D) ​True positives 
A) ​False negatives 
B) False positives 
C) True negatives 
D) ​True positives

Question 7

​Use the following information for question
Transcendent Technologies is deciding between developing a complicated thought-activated software,or a simple voice-activated software.Since the thought-activated software is complicated,it only has a 30% chance of actually going through to a successful launch,but would generate revenues of $50million if launched.The voice-activated software is simple and hence has a 80% chance of being launched but only generates a revenue of $10million.The complicated technology costs 10million,whereas the simple technology costs 2million.
-​If the firm can only afford developing one of the software,which one would it rather develop (based on expected profit/gain)

Accepted Answer

A) ​The simple voice-activated software 
B) The complicated thought-activated software 
C) Neither of the software 
D) ​Need more information 
A) ​The simple voice-activated software 
B) The complicated thought-activated software 
C) Neither of the software 
D) ​Need more information

Question 8

​Three possibilities have probabilities 0.5,0.4 and 0.1 and values $10,$20,and $30 respectively.The expected value is:

Accepted Answer

A) ​$15 
B) $16 
C) $17 
D) ​$18 
A) ​$15 
B) $16 
C) $17 
D) ​$18

Question 9

​Expected values are

Accepted Answer

A) ​Values that you expect from an individual 
B) Mean values 
C) Weighted average outcomes 
D) ​Both B&C 
A) ​Values that you expect from an individual 
B) Mean values 
C) Weighted average outcomes 
D) ​Both B&C

Question 10

​At a carnival roulette wheel,a player can either win $10,$30,or $80.If it costs $20 to play,should the player expect the game to be fair?

Accepted Answer

A) ​Yes,because it costs to play 
B) No,because on average the individual would be earning money on the wheel 
C) No,because all the carnival attractions are unfair 
D) ​Need more information 
A) ​Yes,because it costs to play 
B) No,because on average the individual would be earning money on the wheel 
C) No,because all the carnival attractions are unfair 
D) ​Need more information

Question 11

​You can invest $100,000 into either project A or B.You estimate that A would succeed with a probability of 0.7 in which case it doubles in value.If it fails,its scrap value is $50,000.Project B would succeed with probability 0.6,in which case it would have a value of $150,000.If it fails,project B's scrap value is $30,000.Which project should you invest in?

Accepted Answer

A) ​Project A 
B) Project B 
C) Neither of the projects 
D) ​You cannot tell from the information presented 
A) ​Project A 
B) Project B 
C) Neither of the projects 
D) ​You cannot tell from the information presented

Question 12

​To better align your agent's incentives to your own when buying securities

Accepted Answer

A) ​Offer the agent a high price 
B) Offer the agent a low price 
C) Offer the agent a price based on performance of the security 
D) ​All of the above 
A) ​Offer the agent a high price 
B) Offer the agent a low price 
C) Offer the agent a price based on performance of the security 
D) ​All of the above

Question 13

​Use the following information for question
Transcendent Technologies is deciding between developing a complicated thought-activated software,or a simple voice-activated software.Since the thought-activated software is complicated,it only has a 30% chance of actually going through to a successful launch,but would generate revenues of $50million if launched.The voice-activated software is simple and hence has a 80% chance of being launched but only generates a revenue of $10million.The complicated technology costs 10million,whereas the simple technology costs 2million.
-​Launching the complicated version would be a mistake for probabilities less than ___?

Accepted Answer

A) ​0.2 
B) 0.28 
C) 0.30 
D) ​0.32 
A) ​0.2 
B) 0.28 
C) 0.30 
D) ​0.32

Question 14

The manager of an ice-cream parlor decides to introduce a new ice-cream flavor in his Dallas,TX based restaurants to compare the sales of these restaurants to the ones with no new flavors.She decides to run a difference in difference approach.Which of the following is true?

Accepted Answer

A) ​The first difference would be the difference in the sales of the Dallas stores before and after the introduction 
B) The second difference would be the difference in the sales in other stores before and after the Dallas stores introduced the new flavor 
C) The second difference would be the difference between the post introduction sales in the Dallas stores and the control group 
D) ​Only A&B 
A) ​The first difference would be the difference in the sales of the Dallas stores before and after the introduction 
B) The second difference would be the difference in the sales in other stores before and after the Dallas stores introduced the new flavor 
C) The second difference would be the difference between the post introduction sales in the Dallas stores and the control group 
D) ​Only A&B

Question 15

​At a carnival roulette wheel,a player can either win $10,$30,or $80.At what cost of play should the player expect the wheel to be fair?

Accepted Answer

A) ​$10 
B) $20 
C) $30 
D) ​$40 
A) ​$10 
B) $20 
C) $30 
D) ​$40

Question 16

​Use the following information for question
Transcendent Technologies is deciding between developing a complicated thought-activated software,or a simple voice-activated software.Since the thought-activated software is complicated,it only has a 30% chance of actually going through to a successful launch,but would generate revenues of $50million if launched.The voice-activated software is simple and hence has a 80% chance of being launched but only generates a revenue of $10million.The complicated technology costs 10million,whereas the simple technology costs 2million.
-​Launching the simplified version would be a mistake for probabilities less than ___?

Accepted Answer

A) ​0.6 
B) 0.7 
C) 0.8 
D) ​1.0 
A) ​0.6 
B) 0.7 
C) 0.8 
D) ​1.0

Question 17

​Use the following information for question
Transcendent Technologies is deciding between developing a complicated thought-activated software,or a simple voice-activated software.Since the thought-activated software is complicated,it only has a 30% chance of actually going through to a successful launch,but would generate revenues of $50million if launched.The voice-activated software is simple and hence has a 80% chance of being launched but only generates a revenue of $10million.The complicated technology costs 10million,whereas the simple technology costs 2million.
-​If the firm learns that the complicated technology can be made more stable with a few tweaks increasing the cost by 5.5million and increasing the probability of a launch to 50%.Is it worth for the firm to invest the $500,000 in tweaks?

Accepted Answer

A) ​No,because it decreases the total expected value 
B) Yes,because it increases expected value 
C) No,because it increases risk 
D) ​Yes,because tweaking is good 
A) ​No,because it decreases the total expected value 
B) Yes,because it increases expected value 
C) No,because it increases risk 
D) ​Yes,because tweaking is good

Question 18

Fashion Buyers II
A buyer for a department store must decide on which designs the stores will carry before he knows what the demand will be in the coming season.Choosing a poorly demanded design means lots of unsold merchandise and losses that are $200,000 on average.Passing on a highly demanded design means lots of unsold merchandise and missing out on profits that are $300,000 on average.So long as he is more than 40% confident that the design will be successful,carrying the design will minimize expected decision error costs.Why might he opt to carry designs only if he is more than,say,50% confident of success?​

Accepted Answer

The buyer is rewarded for making good de

Question 19

​Use the following information for question
Transcendent Technologies is deciding between developing a complicated thought-activated software,or a simple voice-activated software.Since the thought-activated software is complicated,it only has a 30% chance of actually going through to a successful launch,but would generate revenues of $50million if launched.The voice-activated software is simple and hence has a 80% chance of being launched but only generates a revenue of $10million.The complicated technology costs 10million,whereas the simple technology costs 2million.
-​If the complicated technology costs $10million to develop while the simple technology costs $2million to develop,which technology is more profitable to develop?

Accepted Answer

A) ​The simple voice-activated software 
B) The complicated thought-activated software 
C) Neither of the software 
D) ​Need more information 
A) ​The simple voice-activated software 
B) The complicated thought-activated software 
C) Neither of the software 
D) ​Need more information

Question 20

​At a fair carnival roulette wheel,a player can either win $10,$30,or $80.If the player were to be made indifferent between playing the game or not,how much should the owner charge him?

Accepted Answer

A) ​$30 
B) $40 
C) $50 
D) ​$80 
A) ​$30 
B) $40 
C) $50 
D) ​$80

At a fair carnival roulette wheel,a player can either win $10,$30,or $80.If it costs $30 to play,would an individual gain or lose from playing the game?

In a coin toss bet,where both heads and tails are equally likely,you win a $2 on heads but lose $1 on tails.The expected value of the bet is

You are considering buying a store.The storeowner gives you an estimate of the net profits of the store on a typical day.The owner has most likely given you the figures for the day when

At a carnival roulette wheel,a player can either win $10,$30,or $80.If it costs $50 to play,we would expect to see

You are considering buying a store.The storeowner gives you an estimate of the net profits of the store on a typical day.The owner has most likely given you the figures for

Type II errors are

Three possibilities have probabilities 0.5,0.4 and 0.1 and values $10,$20,and $30 respectively.The expected value is:

Expected values are

At a carnival roulette wheel,a player can either win $10,$30,or $80.If it costs $20 to play,should the player expect the game to be fair?

To better align your agent's incentives to your own when buying securities

The manager of an ice-cream parlor decides to introduce a new ice-cream flavor in his Dallas,TX based restaurants to compare the sales of these restaurants to the ones with no new flavors.She decides to run a difference in difference approach.Which of the following is true?

At a carnival roulette wheel,a player can either win $10,$30,or $80.At what cost of play should the player expect the wheel to be fair?

At a fair carnival roulette wheel,a player can either win $10,$30,or $80.If the player were to be made indifferent between playing the game or not,how much should the owner charge him?

The One Lessor of Business

Benefits, Costs, and Decisions

Extent How Much Decisions

Investment Decisions: Look Ahead and Reason Back

Simple Pricing

Economies of Scale and Scope

Understanding Markets and Industry Changes

Market Structure and Long Run Equilibrium

Strategy: the Quest to Keep Profit From Eroding

Foreign Exchange, Trade, and Bubbles

More Realistic and Complex Pricing

Direct Price Discrimination

Strategic Games

Bargaining

Auctions

The Problem of Adverse Selection

The Problem of Moral Hazard

Getting Employees to Work in the Firms Best Interest

Getting Divisions to Work in the Firms Best Interest

Managing Vertical Relationships

Filters

Exam 15: Making Decisions With Uncertainty

​At a fair carnival roulette wheel,a player can either win $10,$30,or $80.If it costs $30 to play,would an individual gain or lose from playing the game?

​In a coin toss bet,where both heads and tails are equally likely,you win a $2 on heads but lose $1 on tails.The expected value of the bet is

​You are considering buying a store.The storeowner gives you an estimate of the net profits of the store on a typical day.The owner has most likely given you the figures for the day when

​At a carnival roulette wheel,a player can either win $10,$30,or $80.If it costs $50 to play,we would expect to see

​You are considering buying a store.The storeowner gives you an estimate of the net profits of the store on a typical day.The owner has most likely given you the figures for

​Type II errors are

​Three possibilities have probabilities 0.5,0.4 and 0.1 and values $10,$20,and $30 respectively.The expected value is:

​Expected values are

​At a carnival roulette wheel,a player can either win $10,$30,or $80.If it costs $20 to play,should the player expect the game to be fair?

​To better align your agent's incentives to your own when buying securities

The manager of an ice-cream parlor decides to introduce a new ice-cream flavor in his Dallas,TX based restaurants to compare the sales of these restaurants to the ones with no new flavors.She decides to run a difference in difference approach.Which of the following is true?

​At a carnival roulette wheel,a player can either win $10,$30,or $80.At what cost of play should the player expect the wheel to be fair?

​At a fair carnival roulette wheel,a player can either win $10,$30,or $80.If the player were to be made indifferent between playing the game or not,how much should the owner charge him?

The One Lessor of Business

Benefits, Costs, and Decisions

Extent How Much Decisions

Investment Decisions: Look Ahead and Reason Back

Simple Pricing

Economies of Scale and Scope

Understanding Markets and Industry Changes

Market Structure and Long Run Equilibrium

Strategy: the Quest to Keep Profit From Eroding

Foreign Exchange, Trade, and Bubbles

More Realistic and Complex Pricing

Direct Price Discrimination

Strategic Games

Bargaining

Auctions

The Problem of Adverse Selection

The Problem of Moral Hazard

Getting Employees to Work in the Firms Best Interest

Getting Divisions to Work in the Firms Best Interest

Managing Vertical Relationships

Filters

At a fair carnival roulette wheel,a player can either win $10,$30,or $80.If it costs $30 to play,would an individual gain or lose from playing the game?

In a coin toss bet,where both heads and tails are equally likely,you win a $2 on heads but lose $1 on tails.The expected value of the bet is

You are considering buying a store.The storeowner gives you an estimate of the net profits of the store on a typical day.The owner has most likely given you the figures for the day when

At a carnival roulette wheel,a player can either win $10,$30,or $80.If it costs $50 to play,we would expect to see

You are considering buying a store.The storeowner gives you an estimate of the net profits of the store on a typical day.The owner has most likely given you the figures for

Type II errors are

Three possibilities have probabilities 0.5,0.4 and 0.1 and values $10,$20,and $30 respectively.The expected value is:

Expected values are

At a carnival roulette wheel,a player can either win $10,$30,or $80.If it costs $20 to play,should the player expect the game to be fair?

To better align your agent's incentives to your own when buying securities

At a carnival roulette wheel,a player can either win $10,$30,or $80.At what cost of play should the player expect the wheel to be fair?

At a fair carnival roulette wheel,a player can either win $10,$30,or $80.If the player were to be made indifferent between playing the game or not,how much should the owner charge him?