Exam 19: Introduction to Decision Analysis

If the decision to be made is a one-time decision,the expected value method can be misleading because it represents the average outcome from repeating the decision many times.

(True/False)

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Question 41

Julie is planning to open a restaurant and is considering two possible locations.She has estimated the payoff for each location for each of three different possible levels of restaurant popularity (state of nature)as shown below. Suppose that Julie estimates the following probabilities for each level of restaurant popularity. The expected value of Location 2 is 310.

(True/False)

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Question 42

The expected value under certainty is equal to the difference between the expected value under uncertainty and the expected cost of uncertainty.

(True/False)

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Question 43

A bakery makes fresh donuts every morning.If any are left at the end of the day they are donated to a homeless shelter.The number of donuts that can be sold each day is uncertain and the bakery must decide early each morning,how many donuts to make that day.The bakery has created the following payoff table to summarize the situation. It estimates the following probabilities for the respective levels of demand. If the bakery had perfect information about that day's demand,the expected value under certainty is 275.

(True/False)

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Question 44

Which of the following are two different names for the same thing?

(Multiple Choice)

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Question 45

Fold back the decision tree shown below. Which of the following is correct based on folding back the above tree?

(Multiple Choice)

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Question 46

A bakery makes fresh donuts every morning.If any are left at the end of the day they are donated to a homeless shelter.The number of donuts that can be sold each day is uncertain and the bakery must decide early each morning,how many donuts to make that day.The bakery has created the following payoff table to summarize the situation. It estimates the following probabilities for the respective levels of demand. Which alternative should the bakery choose using the expected value method and what is the expected value?

(Multiple Choice)

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Question 47

Given the following payoff table and probabilities for each state of nature,answer the questions below. Find the expected value for each alternative and indicate which alternative should be chosen based on the expected value method.

(Essay)

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Question 48

The expected value or payoff is lower in an uncertain environment than in a certain environment.

(True/False)

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Question 49

Buy 8 empty lots. At the end of 5 years you plan to sell all the real estate and you expect both houses and lots to appreciate in value.Owning and renting out houses will also provide rental income,but there will also be expenses such as repairs and insurance that would not be involved for empty lots.The amount of appreciation depends on the real estate market that you expect to be one of the three levels shown in the table below along with the expected payoff values (shown in thousands of dollars). Assume that you estimate the following probabilities for the states of the real estate market: Based on the expected value criterion you should choose alternative:

(Multiple Choice)

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Question 50

Under certainty the outcome of each alternative is known before the decision made.

(True/False)

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Question 51

A bakery makes fresh donuts every morning.If any are left at the end of the day they are donated to a homeless shelter.The number of donuts that can be sold each day is uncertain and the bakery must decide early each morning,how many donuts to make that day.The bakery has created the following payoff table to summarize the situation. It estimates the following probabilities for the respective levels of demand. The expected value of A₃ (making many donuts)is 210.

(True/False)

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Question 52

Which of the following is not a characteristic of decision trees?

(Multiple Choice)

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Question 53

Julie is planning to open a restaurant and is considering two possible locations.She has estimated the payoff for each location for each of three different possible levels of restaurant popularity (state of nature)as shown below. The opportunity loss for Location 2 and Poor restaurant popularity is 350.

(True/False)

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Question 54

At each branch point in a decision tree,where the decision maker does not have control,the probabilities must sum to 1.0.

(True/False)

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Question 55

A bakery makes fresh donuts every morning.If any are left at the end of the day they are donated to a homeless shelter.The number of donuts that can be sold each day is uncertain and the bakery must decide early each morning,how many donuts to make that day.The bakery has created the following payoff table to summarize the situation. It estimates the following probabilities for the respective levels of demand. If the bakery could obtain perfect information early in the morning,what is the expected value under certainty?

(Multiple Choice)

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Question 56

Julie is planning to open a restaurant and is considering two possible locations.She has estimated the payoff for each location for each of three different possible levels of restaurant popularity (state of nature)as shown below. The opportunity loss for Location 1 and Poor restaurant popularity is 150.

(True/False)

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Question 57

Which of the following is NOT a step in conducting decision tree analysis?

(Multiple Choice)

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Question 58

Probabilistic decision criteria are used when the probabilities associated with the possible payoffs are unknown.

(True/False)

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Question 59

When a decision maker must make a decision under uncertainty,having perfect information available prior to choosing an alternative would:

(Multiple Choice)

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Question 60

Showing 41 - 60 of 116

If the decision to be made is a one-time decision,the expected value method can be misleading because it represents the average outcome from repeating the decision many times.

The expected value under certainty is equal to the difference between the expected value under uncertainty and the expected cost of uncertainty.

Which of the following are two different names for the same thing?

Fold back the decision tree shown below. Which of the following is correct based on folding back the above tree?

Given the following payoff table and probabilities for each state of nature,answer the questions below. Find the expected value for each alternative and indicate which alternative should be chosen based on the expected value method.

The expected value or payoff is lower in an uncertain environment than in a certain environment.

Under certainty the outcome of each alternative is known before the decision made.

Which of the following is not a characteristic of decision trees?

At each branch point in a decision tree,where the decision maker does not have control,the probabilities must sum to 1.0.

Which of the following is NOT a step in conducting decision tree analysis?

Probabilistic decision criteria are used when the probabilities associated with the possible payoffs are unknown.

When a decision maker must make a decision under uncertainty,having perfect information available prior to choosing an alternative would:

The Where, why, and How of Data Collection

Graphs,charts and Tablesdescribing Your Data

Describing Data Using Numerical Measures

Using Probability and Probability Distributions

Discrete Probability Distributions

Introduction to Continuous Probability Distributions

Introduction to Sampling Distributions

Estimating Single Population Parameters

Introduction to Hypothesis Testing

Estimation and Hypothesis Testing for Two Population Parameters

Hypothesis Tests and Estimation for Population Variances

Analysis of Variance

Goodness-Of-Fit Tests and Contingency Analysis

Introduction to Linear Regression and Correlation Analysis

Multiple Regression Analysis and Model Building

Analyzing and Forecasting Time-Series Data

Introduction to Nonparametric Statistics

Introduction to Quality and Statistical Process Control

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