Question 1

Utilities can be useful when monetary values do not accurately reflect the true values of an outcome.

Accepted Answer

A) True 
 B)False

Question 2

Bayes' decision rule says to choose the alternative with the largest expected payoff.

Accepted Answer

A) True 
 B)False

Question 3

Sensitivity analysis may be useful in decision analysis since prior probabilities may be inaccurate.

Accepted Answer

A) True 
 B)False

Question 4

Figure  
-The expected value of perfect information is:

Accepted Answer

A) 12. 
B) 55. 
C) 57. 
D) 69. 
E) 90. 
A) 12. 
B) 55. 
C) 57. 
D) 69. 
E) 90.

Question 5

The maximin approach involves choosing the alternative with the highest payoff.

Accepted Answer

A) True 
 B)False

Question 6

Figure  
-The expected value of perfect information is:

Accepted Answer

A) 4.5. 
B) 9. 
C) 40.5. 
D) 49.5. 
E) 60. 
A) 4.5. 
B) 9. 
C) 40.5. 
D) 49.5. 
E) 60.

Question 7

What is the expected payoff for the decision to write the economics book?

Accepted Answer

A) 50,000 copies. 
B) 40,000 copies. 
C) 32,000 copies. 
D) 30,500 copies. 
E) 10,500 copies. 
A) 50,000 copies. 
B) 40,000 copies. 
C) 32,000 copies. 
D) 30,500 copies. 
E) 10,500 copies.

Question 8

The maximum likelihood criterion says to focus on the largest payoff.

Accepted Answer

A) True 
 B)False

Question 9

Figure   There is an option of paying $100 to have research done to better predict which state of nature will occur.When the true state of nature is S1,the research will accurately predict S1 60% of the time.When the true state of nature is S2,the research will accurately predict S2 80% of the time.
-What is the posterior probability of S1 given that the research predicts S1?

Accepted Answer

A) 0.18. 
B) 0.44. 
C) 0.57. 
D) 0.65. 
E) 0.82. 
A) 0.18. 
B) 0.44. 
C) 0.57. 
D) 0.65. 
E) 0.82.

Question 10

Figure   There is an option of paying $100 to have research done to better predict which state of nature will occur.When the true state of nature is S1,the research will accurately predict S1 60% of the time.When the true state of nature is S2,the research will accurately predict S2 80% of the time.
-Given that the research is done,what is the joint probability that the state of nature is S1 and the research predicts S2?

Accepted Answer

A) 0.08. 
B) 0.16. 
C) 0.24. 
D) 0.32. 
E) 0.36. 
A) 0.08. 
B) 0.16. 
C) 0.24. 
D) 0.32. 
E) 0.36.

Question 11

What is his expected value of perfect information?

Accepted Answer

A) $187,000. 
B) $132,000. 
C) $123,000. 
D) $65,000. 
E) $55,000.
The head of operations for a movie studio wants to determine which of two new scripts they should select for their next major production.She feels that script #1 has a 70% chance of earning $100 million over the long run,but a 30% chance of losing $20 million.If this movie is successful,then a sequel could also be produced,with an 80% chance of earning $50 million,but a 20% chance of losing $10 million.On the other hand,she feels that script #2 has a 60 % chance of earning $120 million,but a 40% chance of losing $30 million.If successful,its sequel would have a 50% chance of earning $80 million and a 50% chance of losing $40 million.As with the first script,if the original movie is a "flop",then no sequel would be produced. 
A) $187,000. 
B) $132,000. 
C) $123,000. 
D) $65,000. 
E) $55,000.
The head of operations for a movie studio wants to determine which of two new scripts they should select for their next major production.She feels that script #1 has a 70% chance of earning $100 million over the long run,but a 30% chance of losing $20 million.If this movie is successful,then a sequel could also be produced,with an 80% chance of earning $50 million,but a 20% chance of losing $10 million.On the other hand,she feels that script #2 has a 60 % chance of earning $120 million,but a 40% chance of losing $30 million.If successful,its sequel would have a 50% chance of earning $80 million and a 50% chance of losing $40 million.As with the first script,if the original movie is a "flop",then no sequel would be produced.

Question 12

Which of the following is not a criterion for decision making?

Accepted Answer

A) EVPI. 
B) Maximin. 
C) Maximax. 
D) Bayes' decision rule. 
E) Maximum likelihood. 
A) EVPI. 
B) Maximin. 
C) Maximax. 
D) Bayes' decision rule. 
E) Maximum likelihood.

Question 13

Which one of the following statements is not correct when making decisions?

Accepted Answer

A) The sum of the state of nature probabilities must be 1. 
B) Every probability must be greater than or equal to 0. 
C) All probabilities are assumed to be equal. 
D) Probabilities are used to compute expected values. 
E) Perfect information assumes that the state of nature that will actually occur is known. 
A) The sum of the state of nature probabilities must be 1. 
B) Every probability must be greater than or equal to 0. 
C) All probabilities are assumed to be equal. 
D) Probabilities are used to compute expected values. 
E) Perfect information assumes that the state of nature that will actually occur is known.

Question 14

Figure   There is an option of paying $100 to have research done to better predict which state of nature will occur.When the true state of nature is S1,the research will accurately predict S1 60% of the time.When the true state of nature is S2,the research will accurately predict S2 80% of the time.
-Given that the research is done,what is the joint probability that the state of nature is S2 and the research predicts S2?

Accepted Answer

A) 0.08. 
B) 0.16. 
C) 0.24. 
D) 0.32. 
E) 0.36. 
A) 0.08. 
B) 0.16. 
C) 0.24. 
D) 0.32. 
E) 0.36.

Question 15

Figure   There is an option of paying $100 to have research done to better predict which state of nature will occur.When the true state of nature is S1,the research will accurately predict S1 60% of the time.When the true state of nature is S2,the research will accurately predict S2 80% of the time.
-Given that the research is done,what is the joint probability that the state of nature is S2 and the research predicts S1?

Accepted Answer

A) 0.08. 
B) 0.16. 
C) 0.24. 
D) 0.32. 
E) 0.36. 
A) 0.08. 
B) 0.16. 
C) 0.24. 
D) 0.32. 
E) 0.36.

Question 16

Figure  
-The maximum likelihood strategy is:

Accepted Answer

A) Buy. 
B) Rent. 
C) Lease. 
D) High. 
E) Low. 
A) Buy. 
B) Rent. 
C) Lease. 
D) High. 
E) Low.

Question 17

What is the expected payoff for the optimum decision alternative?

Accepted Answer

A) $150 million. 
B) $90.6 million. 
C) $84 million. 
D) $72 million. 
E) $60 million.
Two professors at a nearby university want to co-author a new textbook in either economics or statistics.They feel that if they write an economics book they have a 50% chance of placing it with a major publisher where it should ultimately sell about 40,000 copies.If they can't get a major publisher to take it,then they feel they have an 80% chance of placing it with a smaller publisher,with sales of 30,000 copies.On the other hand if they write a statistics book,they feel they have a 40% chance of placing it with a major publisher,and it should result in ultimate sales of about 50,000 copies.If they can't get a major publisher to take it,they feel they have a 50% chance of placing it with a smaller publisher,with ultimate sales of 35,000 copies. 
A) $150 million. 
B) $90.6 million. 
C) $84 million. 
D) $72 million. 
E) $60 million.
Two professors at a nearby university want to co-author a new textbook in either economics or statistics.They feel that if they write an economics book they have a 50% chance of placing it with a major publisher where it should ultimately sell about 40,000 copies.If they can't get a major publisher to take it,then they feel they have an 80% chance of placing it with a smaller publisher,with sales of 30,000 copies.On the other hand if they write a statistics book,they feel they have a 40% chance of placing it with a major publisher,and it should result in ultimate sales of about 50,000 copies.If they can't get a major publisher to take it,they feel they have a 50% chance of placing it with a smaller publisher,with ultimate sales of 35,000 copies.

Question 18

Figure  
-The expected value of perfect information is:

Accepted Answer

A) -28. 
B) 0. 
C) 10.5. 
D) 19. 
E) 23. 
A) -28. 
B) 0. 
C) 10.5. 
D) 19. 
E) 23.

Question 19

Payoffs always represent profits in decision analysis problems.

Accepted Answer

A) True 
 B)False

Question 20

The Sensit Plot tool is useful for examining the impact of changes in several data values at once.

Accepted Answer

A) True 
 B)False

Utilities can be useful when monetary values do not accurately reflect the true values of an outcome.

Bayes' decision rule says to choose the alternative with the largest expected payoff.

Sensitivity analysis may be useful in decision analysis since prior probabilities may be inaccurate.

Figure -The expected value of perfect information is:

The maximin approach involves choosing the alternative with the highest payoff.

Figure -The expected value of perfect information is:

What is the expected payoff for the decision to write the economics book?

The maximum likelihood criterion says to focus on the largest payoff.

What is his expected value of perfect information?

Which of the following is not a criterion for decision making?

Which one of the following statements is not correct when making decisions?

Figure -The maximum likelihood strategy is:

What is the expected payoff for the optimum decision alternative?

Figure -The expected value of perfect information is:

Payoffs always represent profits in decision analysis problems.

The Sensit Plot tool is useful for examining the impact of changes in several data values at once.

Introduction

Linear Programming: Basic Concepts

Linear Programming: Formulation and Applications

The Art of Modeling With Spreadsheets

What-If Analysis for Linear Programming

Network Optimization Problems

Using Binary Integer Programming to Deal With Yes-Or-No Decisions

Nonlinear Programming

Cd Supplement - Decision Analysis

Forecasting

Queueing Models

CD Supplement - Additional Queueing Models

Computer Simulation: Basic Concepts

CD Supplement - the Inverse Transformation Method for Generating Random Observations

Computer Simulation With Crystal Ball

CD - Solution Concepts for Linear Programming

CD - Transportation and Assignment Problems

CD - Pertcpm Models for Project Management

CD - Goal Programming

CD - Inventory Management With Known Demand

CD - Inventory Management With Uncertain Demand

Filters

Exam 9: Decision Analysis

Utilities can be useful when monetary values do not accurately reflect the true values of an outcome.

Bayes' decision rule says to choose the alternative with the largest expected payoff.

Sensitivity analysis may be useful in decision analysis since prior probabilities may be inaccurate.

Figure -The expected value of perfect information is:

The maximin approach involves choosing the alternative with the highest payoff.

Figure -The expected value of perfect information is:

What is the expected payoff for the decision to write the economics book?

The maximum likelihood criterion says to focus on the largest payoff.

What is his expected value of perfect information?

Which of the following is not a criterion for decision making?

Which one of the following statements is not correct when making decisions?

Figure -The maximum likelihood strategy is:

What is the expected payoff for the optimum decision alternative?

Figure -The expected value of perfect information is:

Payoffs always represent profits in decision analysis problems.

The Sensit Plot tool is useful for examining the impact of changes in several data values at once.

Introduction

Linear Programming: Basic Concepts

Linear Programming: Formulation and Applications

The Art of Modeling With Spreadsheets

What-If Analysis for Linear Programming

Network Optimization Problems

Using Binary Integer Programming to Deal With Yes-Or-No Decisions

Nonlinear Programming

Cd Supplement - Decision Analysis

Forecasting

Queueing Models

CD Supplement - Additional Queueing Models

Computer Simulation: Basic Concepts

CD Supplement - the Inverse Transformation Method for Generating Random Observations

Computer Simulation With Crystal Ball

CD - Solution Concepts for Linear Programming

CD - Transportation and Assignment Problems

CD - Pertcpm Models for Project Management

CD - Goal Programming

CD - Inventory Management With Known Demand

CD - Inventory Management With Uncertain Demand

Filters