Question 1

Statistical decision theory is defined as the collection of techniques a decision maker can apply to choose the best alternative action.

Accepted Answer

A) True 
 B)False  True

Question 2

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

Accepted Answer

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

Question 3

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

Accepted Answer

A) 0 
B) 72 
C) 120 
D) 168 
A) 0 
B) 72 
C) 120 
D) 168 C

Question 4

A person is trying to decide if he or she 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 5

By definition,the decision maker has no control over the states of nature.

Accepted Answer

A) True 
 B)False

Question 6

Optimists advocate a maximin strategy.

Accepted Answer

A) True 
 B)False

Question 7

An expected monetary value can only be greater than or equal to zero.

Accepted Answer

A) True 
 B)False

Question 8

A minimax regret 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 uncertainty 
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 uncertainty 
D) guarantees a payoff for any state of nature

Question 9

A person is trying to decide if he or she 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 10

A state of nature is an uncertain,future event.

Accepted Answer

A) True 
 B)False

Question 11

The national sales manager for "I colored this" (ICT)T-shirts provides all salespersons with the payoff table shown next,giving the estimated profit when a retailer purchases from one to four 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 12

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

Accepted Answer

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

Question 13

The manager of Paul's fruit and vegetable store is considering the purchase of a new seedless watermelon from a wholesale distributor. Because this seedless watermelon costs $4,will sell for $7,and is highly perishable,he expects only to sell between six and nine of them. What is the opportunity loss for purchasing nine watermelons when the demand is for seven watermelons?

Accepted Answer

A) 0 
B) 4 
C) 8 
D) 12 
A) 0 
B) 4 
C) 8 
D) 12

Question 14

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

Accepted Answer

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

Question 15

The manager of Paul's fruit and vegetable store is considering the purchase of a new seedless watermelon from a wholesale distributor. Because this seedless watermelon costs $4,will sell for $7,and is highly perishable,he expects only to sell between six and nine of them. Based on a maximax strategy,what alternative is selected?

Accepted Answer

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

Question 16

The manager of Paul's fruit and vegetable store is considering the purchase of a new seedless watermelon from a wholesale distributor. Because this seedless watermelon costs $4,will sell for $7,and is highly perishable,he expects only to sell between six and nine of them. What is the opportunity loss for purchasing six watermelons when the demand is for eight watermelons?

Accepted Answer

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

Question 17

A maximax 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 uncertainty 
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 uncertainty 
D) guarantees a payoff for any state of nature

Question 18

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

Accepted Answer

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

Question 19

The manager of Paul's fruit and vegetable store is considering the purchase of a new seedless watermelon from a wholesale distributor. Because this seedless watermelon costs $4,will sell for $7,and is highly perishable,he expects only to sell between six and nine of them. What is the opportunity loss for purchasing seven watermelons when the demand is for six watermelons?

Accepted Answer

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

Question 20

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

Accepted Answer

A) 18 
B) 21 
C) 28 
D) 49 
A) 18 
B) 21 
C) 28 
D) 49

Statistical decision theory is defined as the collection of techniques a decision maker can apply to choose the best alternative action.

By definition,the decision maker has no control over the states of nature.

Optimists advocate a maximin strategy.

An expected monetary value can only be greater than or equal to zero.

A minimax regret strategy will always choose the act or alternative that ________.

A state of nature is an uncertain,future event.

A maximax 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

Nonparametric Methods: Nominal Level Hypothesis Tests

Nonparametric Methods: Analysis of Ordinal Data

Index Numbers

Time Series and Forecasting

Statistical Process Control and Quality Management

Filters

Exam 20: An Introduction to Decision Theory

Statistical decision theory is defined as the collection of techniques a decision maker can apply to choose the best alternative action.

By definition,the decision maker has no control over the states of nature.

Optimists advocate a maximin strategy.

An expected monetary value can only be greater than or equal to zero.

A minimax regret strategy will always choose the act or alternative that ________.

A state of nature is an uncertain,future event.

A maximax 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

Nonparametric Methods: Nominal Level Hypothesis Tests

Nonparametric Methods: Analysis of Ordinal Data

Index Numbers

Time Series and Forecasting

Statistical Process Control and Quality Management

Filters