Exam 29: Decision-Making Tools

In the Hurwicz equation,Hᵢ = α x (maximum payoff)+ (1-α)x (minimum payoff); if we set α = 1,then the equation reduces to ______.

Which of the following is a decision-making approach used when the decision maker is optimistic about the future events and their outcomes,identifies the maximum payoff associated with each decision,and chooses the maximum of the maximum payoffs?

In a single toss of a coin,the events heads and tails are ______

Which of the following is a drawback of the maximin criterion?

Which of the following is a drawback of the Laplace criterion?

The actions decision-makers can take to address or solve the problem are referred to as ______.

Which of the following is a decision-making approach that attempts to minimize the regret,or loss,associated with making a nonoptimal decision?

In a decision tree,branches from a circle node represent ______.

ABC operates a factory in the United Kingdom.Because the company's existing factory doesn't have the capacity to meet the future demands,it is considering various options.Consider the payoff matrix that shows the payoff for each combination of decision and state of nature.Determine the best alternative using the maximax criterion. $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$$\text { State of Nature }$ Decision Alte rnatiye Low Demand High Demand Expand current facility \ 4 million \ 5 million Build small factory \ 3 million \ 5.5 million Build large factory -\ 4 million \ 10 million

Which of the following is an analysis a decision maker conducts to determine how sensitive a decision alternative is to change in the probability values of nature?

XYZ is a paint product manufacturer,and one of the plants is experiencing a substantial increase in demand.The future demand for the products could be low,medium,or high,with probabilities estimated to be 25%,50%,and 30%,respectively.The company wants to determine the financial impact associated with the three decision alternatives under the varying levels of demand.Given the following payoff matrix,determine the EV for the option of building a new plant. $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text { Demand }$ Decision Aternative Low (20\%) Medium (50\%) High (30\%) Subcontract additional capacity \ 7 million \ 40 million \ 70 m illion Build a new plant -\ 55 million \ 25 million \ 100 million Do nothing \ 15 million \ 30 illion \ 85 million

Consider that you are getting ready to leave outside in the morning,and weather forecasters predict rain.You getting wet or staying dry and being burdened with carrying a raincoat or not are all examples of ______.

In the Hurwicz equation,Hi = α x (maximum payoff)+ (1-α)x (minimum payoff); if we set α = 0,then the equation reduces to ______.

Use the following data to answer questions 77-87. -Refer to the data on Expected Demand for Acme Widgets.Based on the Hurwicz criterion,what is the payoff for the "outsource" option if you used the coefficient of realism of 0.6?

Use the following data to answer questions 88-100. Expected Demand for Weston Gadgets, Inc. Decision Alternative Low 35\% Medium 30\% High 35\% Outsource \ 16.00 million \ 28.00 million \ 66.00 million Build capacity \ 4.00 million \ 32.00 million \ 26.00 million Do nothing \ 9.00 million \ 18.00 million \ 66.00 million -Refer to the data on Expected Demand for Weston Gadgets,Inc.Based on the Hurwicz criterion,which of the following options would you choose if you used the coefficient of realism of 0.6?

Sensitivity analysis involves constructing a graph and then using simple algebra to determine the range of probability values when there are ______ states of nature.

XYZ is a paint product manufacturer,and one of the plants is experiencing a substantial increase in demand.The future demand for the products could be low,medium,or high,with probabilities estimated to be 25%,50%,and 30%,respectively.The company wants to determine the financial impact associated with the three decision alternatives under the varying levels of demand.Given the following payoff matrix,compute the expected value of decisions with perfect information. $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text { Demand }$ Decision Altemative Low(20\%) Medium(50\%) High (30\%) Subcontract additional capacity \ 7 million \ 40 million \ 70 million Build a new plant -\ 55 million \ 25 million \ 100 million

Which of the following is NOT one of the elements in the decision-making process?

Use the following data to answer questions 77-87. -Refer to the data on Expected Demand for Acme Widgets.For the various demand scenarios,if you applied the Laplace criterion,which option gives the highest payoff?

Consider that you are getting ready to leave outside in the morning,and weather forecasters predict rain.Whether or not it will rain is an illustration of ______.