Question 1

In decision theory, an uncertain future outcome is called a: ____________________

Accepted Answer

The answer of In decision theory, an uncertain future outcome...

Question 2

The expected value under conditions of uncertainty subtracted from the expected value under conditions of certainty will result in the

Accepted Answer

A)  expected value of perfect information. 
B)  expected opportunity loss. 
C)  expected monetary value. 
D)  expected decision strategy. 
A)  expected value of perfect information. 
B)  expected opportunity loss. 
C)  expected monetary value. 
D)  expected decision strategy.

Question 3

Sensitivity analysis examines the effects that changes in the probabilities for the states of nature have on the expected values of the alternatives or acts, and the corresponding decisions.

Accepted Answer

A) True 
 B)False

Question 4

A person is trying to decide if they should buy a lottery ticket. The ticket costs $2.00. If the ticket is a winner, the prize would be $1,000. Knowing that winning $1,000 is not a certain outcome (state of nature), the person finds that the probability of winning is 0.001. Based on this information, the following payoff table can be constructed:   What is the decision using a maximin approach?

Accepted Answer

A)  Buy 
B)  Don't buy 
C)  Lose 
D)  Win 
A)  Buy 
B)  Don't buy 
C)  Lose 
D)  Win

Question 5

A person is trying to decide if they should buy a lottery ticket. The ticket costs $2.00. If the ticket is a winner, the prize would be $1,000. Knowing that winning $1,000 is not a certain outcome (state of nature), the person finds that the probability of winning is 0.001. Based on this information, the following payoff table can be constructed:   What is the expected monetary value of buying the ticket?

Accepted Answer

A)  +$1.00 
B)  -$0.998 
C)  +$0.998 
D)  -$1.998 
A)  +$1.00 
B)  -$0.998 
C)  +$0.998 
D)  -$1.998

Question 6

What is the potential loss associated with a future state of nature called? ________________________

Accepted Answer

The answer of What is the potential loss associated with...

Question 7

The manager of Paul's fruit and vegetable store is considering the purchase of a new seedless watermelon from a wholesale distributor. Since this seedless watermelon costs $4, will sell for $7, and is highly perishable, he only expects to sell between 6 and 9 of them. What is the payoff value for the purchase of 7 watermelons when the demand is for 7 or more watermelons?

Accepted Answer

A)  18 
B)  21 
C)  24 
D)  42 
A)  18 
B)  21 
C)  24 
D)  42

Question 8

A way to decide which common stock to purchase is to determine the profit that might be lost because the exact state of nature (the market behavior) was not known at the time the investor bought the stock. This potential loss is called opportunity loss or regret.

Accepted Answer

A) True 
 B)False

Question 9

You have four different strategic business plans you can select to implement against your competitors.You estimate that the probability that the competitors are aware of your strategies is 0.3 and 0.7 that they are unaware.The payoffs are estimated for each scenario.   What is the maximin choice?

Accepted Answer

The answer of You have four different strategic business plans...

Question 10

The national sales manager for "I colored this" (ICT) T-shirts, provides all salespersons with the opportunity loss table showing the potential lost profit for each purchase decision or act from 1 to 4 dozen T-shirts. The probability of demand for each state of nature is also shown.   What is the expected opportunity loss of purchasing 4 dozen T-shirts?

Accepted Answer

A)  84 
B)  108 
C)  156 
D)  204 
A)  84 
B)  108 
C)  156 
D)  204

Question 11

The manager of Paul's fruit and vegetable store is considering the purchase of a new seedless watermelon from a wholesale distributor. Since this seedless watermelon costs $4, will sell for $7, and is highly perishable, he only expects to sell between 6 and 9 of them. What is the payoff value for the purchase of 6 watermelons when the demand is for 6 watermelons?

Accepted Answer

A)  18 
B)  21 
C)  24 
D)  42 
A)  18 
B)  21 
C)  24 
D)  42

Question 12

In statistical decision making, the act or decision alternative yielding the maximum expected payoff also yields the minimum ________________.

Accepted Answer

The answer of In statistical decision making, the act or...

Question 13

The manager of Paul's fruit and vegetable store is considering the purchase of a new seedless watermelon from a wholesale distributor. Since this seedless watermelon costs $4, will sell for $7, and is highly perishable, he only expects to sell between 6 and 9 of them. If the merchant purchases 7 watermelons, the maximum opportunity loss occurs when the demand is how many units?

Accepted Answer

A)  6 
B)  7 
C)  8 
D)  9 
A)  6 
B)  7 
C)  8 
D)  9

Question 14

You have four different strategic business plans you can select to implement against your competitors.You estimate that the probability that the competitors are aware of your strategies is 0.3 and 0.7 that they are unaware.The payoffs are estimated for each scenario.   What strategy should you choose if the competitor is unaware?

Accepted Answer

The answer of You have four different strategic business plans...

Question 15

You have four different strategic business plans you can select to implement against your competitors.You estimate that the probability that the competitors are aware of your strategies is 0.3 and 0.7 that they are unaware.The payoffs are estimated for each scenario.   What is the expected value of perfect information?

Accepted Answer

The answer of You have four different strategic business plans...

Question 16

A person is trying to decide if they should buy a lottery ticket. The ticket costs $2.00. If the ticket is a winner, the prize would be $1,000. Knowing that winning $1,000 is not a certain outcome (state of nature), the person finds that the probability of winning is 0.001. Based on this information, the following payoff table can be constructed:   What is the probability of losing $2.00?

Accepted Answer

A)  0.001 
B)  0.999 
C)  1.00 
D)  Cannot be computed 
A)  0.001 
B)  0.999 
C)  1.00 
D)  Cannot be computed

Question 17

You have a decision to invest $10,000 in any of four different companies.You estimate that the probabilities that the economy will be favorable or unfavorable, and you estimate the percent returns over the next year.   What is the maximax choice?

Accepted Answer

The answer of You have a decision to invest $10,000...

Question 18

What is the most optimistic of all possible decision making strategies?

Accepted Answer

A)  Minimax 
B)  Maximax 
C)  Maximin 
D)  Minimax regret 
A)  Minimax 
B)  Maximax 
C)  Maximin 
D)  Minimax regret

Question 19

A maximin strategy will always choose the act or alternative that

Accepted Answer

A)  maximizes the expected monetary value. 
B)  minimizes the maximum regret or opportunity loss. 
C)  maximizes the potential payoff regardless of the state of nature. 
D)  guarantees a payoff for any state of nature. 
A)  maximizes the expected monetary value. 
B)  minimizes the maximum regret or opportunity loss. 
C)  maximizes the potential payoff regardless of the state of nature. 
D)  guarantees a payoff for any state of nature.

Question 20

The national sales manager for "I colored this" (ICT) T-shirts, provides all salespersons with the opportunity loss table showing the potential lost profit for each purchase decision or act from 1 to 4 dozen T-shirts. The probability of demand for each state of nature is also shown.   How many dozen T-shirts should you purchase based on minimizing the expected opportunity loss?

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  4 
A)  1 
B)  2 
C)  3 
D)  4

In decision theory, an uncertain future outcome is called a: ____________________

The expected value under conditions of uncertainty subtracted from the expected value under conditions of certainty will result in the

Sensitivity analysis examines the effects that changes in the probabilities for the states of nature have on the expected values of the alternatives or acts, and the corresponding decisions.

What is the potential loss associated with a future state of nature called? ________________________

A way to decide which common stock to purchase is to determine the profit that might be lost because the exact state of nature (the market behavior) was not known at the time the investor bought the stock. This potential loss is called opportunity loss or regret.

You have four different strategic business plans you can select to implement against your competitors.You estimate that the probability that the competitors are aware of your strategies is 0.3 and 0.7 that they are unaware.The payoffs are estimated for each scenario. What is the maximin choice?

In statistical decision making, the act or decision alternative yielding the maximum expected payoff also yields the minimum ________________.

You have a decision to invest $10,000 in any of four different companies.You estimate that the probabilities that the economy will be favorable or unfavorable, and you estimate the percent returns over the next year. What is the maximax choice?

What is the most optimistic of all possible decision making strategies?

A maximin strategy will always choose the act or alternative that

What Is Statistics

Describing Data: Frequency Tables, Frequency Distributions, and Graphic Presentation

Describing Data: Numerical Measures

Describing Data: Displaying and Exploring Data

A Survey of Probability Concepts

Discrete Probability Distributions

Continuous Probability Distributions

Sampling Methods and the Central Limit Theorem

Estimation and Confidence Intervals

One-Sample Tests of Hypothesis

Two-Sample Tests of Hypothesis

Analysis of Variance

Correlation and Linear Regression

Multiple Regression Analysis

Index Numbers

Time Series and Forecasting

Nonparametric Methods: Goodness-Of-Fit Tests

Nonparametric Methods: Analysis of Ranked Data

Statistical Process Control and Quality Management

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Exam 20: An Introduction to Decision Theory

In decision theory, an uncertain future outcome is called a: ____________________

The expected value under conditions of uncertainty subtracted from the expected value under conditions of certainty will result in the

Sensitivity analysis examines the effects that changes in the probabilities for the states of nature have on the expected values of the alternatives or acts, and the corresponding decisions.

What is the potential loss associated with a future state of nature called? ________________________

A way to decide which common stock to purchase is to determine the profit that might be lost because the exact state of nature (the market behavior) was not known at the time the investor bought the stock. This potential loss is called opportunity loss or regret.

You have four different strategic business plans you can select to implement against your competitors.You estimate that the probability that the competitors are aware of your strategies is 0.3 and 0.7 that they are unaware.The payoffs are estimated for each scenario. What is the maximin choice?

In statistical decision making, the act or decision alternative yielding the maximum expected payoff also yields the minimum ________________.

You have a decision to invest $10,000 in any of four different companies.You estimate that the probabilities that the economy will be favorable or unfavorable, and you estimate the percent returns over the next year. What is the maximax choice?

What is the most optimistic of all possible decision making strategies?

A maximin strategy will always choose the act or alternative that

What Is Statistics

Describing Data: Frequency Tables, Frequency Distributions, and Graphic Presentation

Describing Data: Numerical Measures

Describing Data: Displaying and Exploring Data

A Survey of Probability Concepts

Discrete Probability Distributions

Continuous Probability Distributions

Sampling Methods and the Central Limit Theorem

Estimation and Confidence Intervals

One-Sample Tests of Hypothesis

Two-Sample Tests of Hypothesis

Analysis of Variance

Correlation and Linear Regression

Multiple Regression Analysis

Index Numbers

Time Series and Forecasting

Nonparametric Methods: Goodness-Of-Fit Tests

Nonparametric Methods: Analysis of Ranked Data

Statistical Process Control and Quality Management

Filters