Question 1

A decision maker usually has a choice among several possible alternative acts. For each alternative act, there are many possible results called events.

Accepted Answer

A) True 
 B)False

Question 2

Applying probabilities to a payoff table results in:

Accepted Answer

A)  expected opportunity loss for each alternative or act. 
B)  expected monetary value for each alternative or act. 
C)  expected value of perfect information. 
D)  decision tree. 
A)  expected opportunity loss for each alternative or act. 
B)  expected monetary value for each alternative or act. 
C)  expected value of perfect information. 
D)  decision tree.

Question 3

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 opportunity loss for purchasing 6 watermelons when the demand is for 6 watermelons?

Accepted Answer

A)  0 
B)  3 
C)  4 
D)  6 
A)  0 
B)  3 
C)  4 
D)  6

Question 4

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 expected value for Company 1?

Accepted Answer

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

Question 5

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 opportunity loss for purchasing 7 watermelons when the demand is for 6 watermelons?

Accepted Answer

A)  0 
B)  3 
C)  4 
D)  6 
A)  0 
B)  3 
C)  4 
D)  6

Question 6

A person is trying to decide if they should buy a lottery ticket.The ticket costs $1.00.If the ticket is a winner, the prize would be $10,000.Knowing that winning $10,000 is not a certain outcome (state of nature), the person finds that the probability of winning is 0.0009.Based on this information, the following payoff table can be constructed:   What is the decision using a maximin approach?

Accepted Answer

The answer of A person is trying to decide if...

Question 7

The national sales manager for "I colored this" (ICT) T-shirts, provides all salespersons with the payoff table shown below, giving the estimated profit when a retailer purchases from 1 to 4 dozen T-shirts. The probability of demand for each state of nature is also shown.   What is the expected payoff for purchasing 4 dozen T-shirts?

Accepted Answer

A)  72 
B)  120 
C)  168 
D)  192 
A)  72 
B)  120 
C)  168 
D)  192

Question 8

A state of nature is an uncertain, future event.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is NOT a component of the decision-making process?

Accepted Answer

A)  Alternatives 
B)  Payoff 
C)  States of nature 
D)  Seasonal indexes 
A)  Alternatives 
B)  Payoff 
C)  States of nature 
D)  Seasonal indexes

Question 10

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:   Based on the expected monetary value of buying a ticket, what is the best decision?

Accepted Answer

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

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. If the merchant purchases 8 watermelons, the minimum 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 12

The national sales manager for "I colored this" (ICT) T-shirts, provides all salespersons with the payoff table shown below, giving the estimated profit when a retailer purchases from 1 to 4 dozen T-shirts. The probability of demand for each state of nature is also shown.   What is the expected payoff for purchasing 2 dozen T-shirts?

Accepted Answer

A)  72 
B)  120 
C)  168 
D)  192 
A)  72 
B)  120 
C)  168 
D)  192

Question 13

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 value of perfect information?

Accepted Answer

A)  $1.00 
B)  $0.998 
C)  $1.998 
D)  Cannot be computed 
A)  $1.00 
B)  $0.998 
C)  $1.998 
D)  Cannot be computed

Question 14

What is the practical value of knowing the value of perfect information?

Accepted Answer

The value of perfect informati

Question 15

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 9 watermelons when the demand is for 6 watermelons?

Accepted Answer

A)  6 
B)  13 
C)  20 
D)  27 
A)  6 
B)  13 
C)  20 
D)  27

Question 16

Besides a payoff table, the information for decision analysis can be organized using a

Accepted Answer

A)  decision tree. 
B)  scatter diagram. 
C)  fishbone diagram. 
D)  Pareto chart. 
A)  decision tree. 
B)  scatter diagram. 
C)  fishbone diagram. 
D)  Pareto chart.

Question 17

The national sales manager for "I colored this" (ICT) T-shirts, provides all salespersons with the payoff table shown below, giving the estimated profit when a retailer purchases from 1 to 4 dozen T-shirts. The probability of demand for each state of nature is also shown.   What would be the best decision if the maximin strategy is used?

Accepted Answer

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

Question 18

What is the difference between the expected monetary value under conditions of certainty and the expected monetary value under uncertainty called? ___________

Accepted Answer

Value of p

Question 19

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 2 dozen T-shirts?

Accepted Answer

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

Question 20

What is the average return for a particular act or decision alternative called? ____________________

Accepted Answer

Expected m

A decision maker usually has a choice among several possible alternative acts. For each alternative act, there are many possible results called events.

Applying probabilities to a payoff table results in:

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 expected value for Company 1?

A state of nature is an uncertain, future event.

Which of the following is NOT a component of the decision-making process?

What is the practical value of knowing the value of perfect information?

Besides a payoff table, the information for decision analysis can be organized using a

What is the difference between the expected monetary value under conditions of certainty and the expected monetary value under uncertainty called? ___________

What is the average return for a particular act or decision alternative called? ____________________

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

A decision maker usually has a choice among several possible alternative acts. For each alternative act, there are many possible results called events.

Applying probabilities to a payoff table results in:

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 expected value for Company 1?

A state of nature is an uncertain, future event.

Which of the following is NOT a component of the decision-making process?

What is the practical value of knowing the value of perfect information?

Besides a payoff table, the information for decision analysis can be organized using a

What is the difference between the expected monetary value under conditions of certainty and the expected monetary value under uncertainty called? ___________

What is the average return for a particular act or decision alternative called? ____________________

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