Question 1

Square nodes in a decision tree indicate that a decision must be made.

Accepted Answer

A) True 
 B)False

Question 2

Circular nodes in a decision tree indicate that it would be incorrect to choose a path from the node.

Accepted Answer

A) True 
 B)False

Question 3

Fold back the decision tree and state what strategy should be followed.

Accepted Answer

@#IMG-DLM& Strategy: Select A.

Question 4

For a maximization problem,the optimistic approach is often referred to as the

Accepted Answer

A) minimax approach 
B) maximin approach 
C) maximax approach 
D) minimin approach 
A) minimax approach 
B) maximin approach 
C) maximax approach 
D) minimin approach

Question 5

For a maximization problem,the conservative approach is often referred to as the

Accepted Answer

A) minimax approach 
B) maximum approach 
C) maximax approach 
D) minimin approach 
A) minimax approach 
B) maximum approach 
C) maximax approach 
D) minimin approach

Question 6

Explain why the decision maker might feel uncomfortable with the expected value approach,and decide to use a non-probabilistic approach even when probabilities are available.

Accepted Answer

The decision maker might feel uncomforta

Question 7

The Sunshine Manufacturing Company has developed a unique new product and must now decide between two facility plans.The first alternative is to build a large new facility immediately.The second alternative is to build a small plant initially and to consider expanding it to a larger facility three years later if the market has proven favorable.
Marketing has provided the following probability estimates for a ten-year plan: $$\begin{array} { c c c } 
\hline \hline \text { First 3-Year Demand } & \text { Next 7-Year Demand } & \text { Frobability } \
\hline \text { Unfavorable } & \text { Unfavorable } & .2 \
\text { Unfavorable } & \text { Favorable } & .0 \
\text { Favorable } & \text { Favorable } & .7 \
\text { Favorable } & \text { Unfavorable } & .1 \
\hline \hline
\end{array}$$ If the small plant is expanded,the probability of demands over the remaining seven years is 7/8 for favorable and 1/8 for unfavorable.The accounting department has provided the payoff for each outcome: $$\begin{array} { l c r } 
\hline \hline
{ \text { Demand } } & \text { Facility Plan } & \text { Payoff } \
\hline \text { Favorable, favorable } & 1 & \$ 5,000,000 \
\text { Favorable, unfavorable } & 1 & 2,500,000 \
\text { Unfavorable, unfavorable } & 1 & 1,000,000 \
\text { Favorable, favorable } & \text { 2--expanded } & 4,000,000 \
\text { Favorable, unfavorable } & \text { 2-expanded } & 100,000 \
\text { Favorable, favorable } & \text { 2-not expanded } & 1,500,000 \
\text { Favorable, unfavorable } & \text { 2--not expanded } & 500,000 \
\text { Unfavorable, unfavorable } & \text { 2-not expanded } & 300,000 \
\hline \hline
\end{array}$$ With these estimates,analyze Sunshine's facility decision and: 
a. Perform a complete decision tree analysis.
b. Recommend a strategy to Sunshine.
c. Determine what payoffs will result from your recommendation.

Accepted Answer

a.Decision tree: @#IMG-DLM& b.Recommende

Question 8

Sample information with an efficiency rating of 100% is perfect information.

Accepted Answer

A) True 
 B)False

Question 9

The approach to determine the optimal decision strategy involves

Accepted Answer

A) a forward (left to right) pass through the decision tree 
B) a backward (right to left) pass through the decision tree 
C) choosing the outcome of a chance event with the greatest probability 
D) choosing the outcome of a chance event with the greatest payoff 
A) a forward (left to right) pass through the decision tree 
B) a backward (right to left) pass through the decision tree 
C) choosing the outcome of a chance event with the greatest probability 
D) choosing the outcome of a chance event with the greatest payoff

Question 10

To find the EVSI,

Accepted Answer

A) use the EVPI to calculate sample information probabilities. 
B) use indicator probabilities to calculate prior probabilities. 
C) use prior and sample information probabilities to calculate revised probabilities. 
D) use sample information to revise the sample information probabilities. 
A) use the EVPI to calculate sample information probabilities. 
B) use indicator probabilities to calculate prior probabilities. 
C) use prior and sample information probabilities to calculate revised probabilities. 
D) use sample information to revise the sample information probabilities.

Question 11

Sensitivity analysis considers

Accepted Answer

A) how sensitive the decision maker is to risk. 
B) changes in the number of states of nature. 
C) changes in the values of the payoffs. 
D) changes in the available alternatives. 
A) how sensitive the decision maker is to risk. 
B) changes in the number of states of nature. 
C) changes in the values of the payoffs. 
D) changes in the available alternatives.

Question 12

Decision tree probabilities refer to the probability of

Accepted Answer

A) an uncertain event occurring 
B) the decision being made 
C) finding an optimal value 
D) overlooked choices 
A) an uncertain event occurring 
B) the decision being made 
C) finding an optimal value 
D) overlooked choices

Question 13

A decision tree provides:

Accepted Answer

A) a heuristic method for analyzing decisions 
B) a deterministic approach to decision analysis 
C) the absolute value of the decision 
D) an objective way of determining the relative value of each decision alternative 
A) a heuristic method for analyzing decisions 
B) a deterministic approach to decision analysis 
C) the absolute value of the decision 
D) an objective way of determining the relative value of each decision alternative

Question 14

Why perform sensitivity analysis? Of what use is sensitivity analysis where good probability estimates are difficult to obtain?

Accepted Answer

Sensitivity analysis is a crucial techni

Question 15

A decision tree

Accepted Answer

A) presents all decision alternatives first and follows them with all states of nature. 
B) presents all states of nature first and follows them with all decision alternatives. 
C) alternates the decision alternatives and states of nature. 
D) arranges decision alternatives and states of nature in their natural chronological order. 
A) presents all decision alternatives first and follows them with all states of nature. 
B) presents all states of nature first and follows them with all decision alternatives. 
C) alternates the decision alternatives and states of nature. 
D) arranges decision alternatives and states of nature in their natural chronological order.

Question 16

The expected value of sample information can never be less than the expected value of perfect information.

Accepted Answer

A) True 
 B)False

Question 17

Making a good decision

Accepted Answer

A) requires probabilities for all states of nature. 
B) requires a clear understanding of decision alternatives, states of nature, and payoffs. 
C) implies that a desirable outcome will occur. 
D) All of the alternatives are true. 
A) requires probabilities for all states of nature. 
B) requires a clear understanding of decision alternatives, states of nature, and payoffs. 
C) implies that a desirable outcome will occur. 
D) All of the alternatives are true.

Question 18

An appliance dealer must decide how many (if any)new microwave ovens to order for next month.The ovens cost $220 and sell for $300.Because the oven company is coming out with a new product line in two months,any ovens not sold next month will have to be sold at the dealer's half price clearance sale.Additionally,the appliance dealer feels he suffers a loss of $25 for every oven demanded when he is out of stock.On the basis of past months' sales data,the dealer estimates the probabilities of monthly demand (D)for 0,1,2,or 3 ovens to be .3,.4,.2,and .1,respectively.
The dealer is considering conducting a telephone survey on the customers' attitudes towards microwave ovens.The results of the survey will either be favorable (F),unfavorable (U)or no opinion (N).The dealer's probability estimates for the survey results based on the number of units demanded are:
P(F | D = 0)= .1
P(F | D = 2).3
P(U | D = 0)= .8
P(U | D = 2)= .1
P(F | D = 1)= .2
P(F | D = 3).9
P(U | D = 1)= .3
P(U | D = 3)= .1
a.What is the dealer's optimal decision without conducting the survey?
b.What is the EVPI?
c.Based on the survey results what is the optimal decision strategy for the dealer?
d.What is the maximum amount he should pay for this survey?

Accepted Answer

@#IMG-DLM& a.Order one oven: EV = $25.00

Question 19

After all probabilities and payoffs are placed on a decision tree,the decision maker calculates expected values at state of nature nodes and makes selections at decision nodes.

Accepted Answer

A) True 
 B)False

Question 20

A payoff table is given as $$\begin{array} { c | cc c } 
& &{ \text { State of Nature } } \
\text { Decision } &s1&s1&s3\
\hline
d_{1} & 10 & 8 & 6 \
d_{2} & 14 & 15 & 2 \
d_{3} & 7 & 8 & 9
\end{array}$$ 
a.What decision should be made by the optimistic decision maker?
b.What decision should be made by the conservative decision maker?
c.What decision should be made under minimax regret?
d.If the probabilities of s1, s2, and s3 are .2, .4, and .4, respectively, then what decision should be made under expected value?
e.What is the EVPI?

Accepted Answer

a.d₂ b.d₃ c.a three way tie d.EV

Square nodes in a decision tree indicate that a decision must be made.

Circular nodes in a decision tree indicate that it would be incorrect to choose a path from the node.

Fold back the decision tree and state what strategy should be followed.

For a maximization problem,the optimistic approach is often referred to as the

For a maximization problem,the conservative approach is often referred to as the

Explain why the decision maker might feel uncomfortable with the expected value approach,and decide to use a non-probabilistic approach even when probabilities are available.

Sample information with an efficiency rating of 100% is perfect information.

The approach to determine the optimal decision strategy involves

To find the EVSI,

Sensitivity analysis considers

Decision tree probabilities refer to the probability of

A decision tree provides:

Why perform sensitivity analysis? Of what use is sensitivity analysis where good probability estimates are difficult to obtain?

A decision tree

The expected value of sample information can never be less than the expected value of perfect information.

Making a good decision

After all probabilities and payoffs are placed on a decision tree,the decision maker calculates expected values at state of nature nodes and makes selections at decision nodes.

Introduction

Introduction to Probability

Probability Distributions

Utility and Game Theory

Times Series Analysis and Forecasting

Introduction to Linear Programming

Linear Programming: Sensitivity Analysis and Interpretation of Solution

Linear Programming Applications in Marketing, Finance, and Operations Management

Distribution and Network Models

Integer Linear Programming

Advanced Optimization Applications

Project Scheduling: Pertcpm

Inventory Models

Waiting Line Models

Simulation

Markov Processes

Filters

Exam 4: Decision Analysis

Square nodes in a decision tree indicate that a decision must be made.

Circular nodes in a decision tree indicate that it would be incorrect to choose a path from the node.

Fold back the decision tree and state what strategy should be followed.

For a maximization problem,the optimistic approach is often referred to as the

For a maximization problem,the conservative approach is often referred to as the

Explain why the decision maker might feel uncomfortable with the expected value approach,and decide to use a non-probabilistic approach even when probabilities are available.

Sample information with an efficiency rating of 100% is perfect information.

The approach to determine the optimal decision strategy involves

To find the EVSI,

Sensitivity analysis considers

Decision tree probabilities refer to the probability of

A decision tree provides:

Why perform sensitivity analysis? Of what use is sensitivity analysis where good probability estimates are difficult to obtain?

A decision tree

The expected value of sample information can never be less than the expected value of perfect information.

Making a good decision

After all probabilities and payoffs are placed on a decision tree,the decision maker calculates expected values at state of nature nodes and makes selections at decision nodes.

Introduction

Introduction to Probability

Probability Distributions

Utility and Game Theory

Times Series Analysis and Forecasting

Introduction to Linear Programming

Linear Programming: Sensitivity Analysis and Interpretation of Solution

Linear Programming Applications in Marketing, Finance, and Operations Management

Distribution and Network Models

Integer Linear Programming

Advanced Optimization Applications

Project Scheduling: Pertcpm

Inventory Models

Waiting Line Models

Simulation

Markov Processes

Filters