Question 1

The _________ curve of an individual decision maker is a plot of the decision-maker's utilities versus the profits.

Accepted Answer

The answer of The _________ curve of an individual decision...

Question 2

The quality control manager for the NKA Inc.must decide whether to accept (alternative 1),further analyze (alternative 2),or reject (alternative 3)the shipment (lot)of incoming material.The historical data indicates that there is 30% chance that the lot is poor quality (SS1U1B11S1U1B0),50% chance that the lot is fair quality (SS1U1B12S1U1B0),and 20% chance that the lot is good quality (SS1U1B13S1U1B0).Assume the following payoff table is available.The values in the payoff table are in thousands of dollars. $$\begin{array} { l c c c } 
& { \text { States of Nature } } \
\text { Decision } & \mathrm { S } _ { 1 } & \mathrm {~S} _ { 2 } & \mathrm {~S} _ { 3 } \
\text { Accept } & 20 & 30 & 90 \
\text { Further analyze } & 60 & 70 & 15 \
\text { Reject } & 80 & 50 & 30
\end{array}$$ Based on historical data,if the lot is of poor quality,40% of the items are defective.If the lot is fair quality,22% of the items are defective.If the lot is good quality,10 % of the items are defective.The quality control manager inspects one unit from a recent shipment.
-After inspecting one unit,the manager determines that the unit is not defective.Based on this additional information,determine the revised (posterior)probabilities for each of the three states of nature.

Accepted Answer

.24,.52,.24
Let:
D =

Question 3

The alternatives 1 and 2 in the following payoff table represent the two possible manufacturing strategies that the EKA manufacturing company can adopt.The level of demand affects the success of both strategies.The states of nature (SS1U1B1iS1U1B0,i = 1,2 3)represent the levels of demand for the company products.SS1U1B11S1U1B0,SS1U1B12S1U1B0,and SS1U1B13S1U1B0 characterize high,medium,and low demand respectively.The payoff values are in thousands of dollars. $\text { States of nature }$
$\begin{array} { | l | r | r | r |  } 
\hline \text { Alternatives } & \mathbf { s } _ { \mathbf { 1 } }  & \mathbf { s } _ { \mathbf { 2 } } &  { \mathbf { s } _ { \mathbf { 3 } } } \
\hline \text { Strategy 1 }  & 110 & 80 & 70 \
\hline \text { Strategy 2 } & 60 & 120 & 50 \
\hline
\end{array}$ The management believes that the weather conditions significantly affect the level of demand.48 monthly sales reports are randomly selected.These monthly sales reports showed 15 months with high demand,28 months with medium demand,and 5 months with low demand.12 of the 15 months with high demand had favourable weather conditions.14 of the 28 months with medium demand had favourable weather conditions.Only 1 of the 5 months with low demand had favourable weather conditions.Based on this information,the prior probabilities have been revised.If the weather conditions are favourable,P(SS1U1B11S1U1B0)= .4286,P(SS1U1B12S1U1B0)= .5357,and P(SS1U1B13S1U1B0)= .0357,and if the weather conditions are poor,P(SS1U1B11S1U1B0)= .1364,P(SS1U1B12S1U1B0)= .6818,and P(SS1U1B13S1U1B0)= .1818.It is also determined that the probability of favourable weather is 0.56 and the probability of poor weather is 0.44.
-Determine the expected value of sample information.What is the maximum amount that the company is willing to pay for the weather information and the additional analysis?

Accepted Answer

EVSI = 0.5 or $500
If the weather condit

Question 4

The expected _____________________ is the difference between the expected value of sampling and the cost of sampling.

Accepted Answer

net gain o

Question 5

The expected net gain of sampling equals the _______________ minus the cost of sampling.

Accepted Answer

expected v

Question 6

The quality control manager for the NKA Inc.must decide whether to accept (alternative 1),further analyze (alternative 2),or reject (alternative 3)the shipment (lot)of incoming material.The historical data indicates that there is 30% chance that the lot is poor quality (S1),50% chance that the lot is fair quality (S2),and 20% chance that the lot is good quality (S3).Assume the following payoff table is available.The values in the payoff table are in thousands of dollars. $$\begin{array} { l c c c } 
& { \text { States of Nature } } \
\text { Decision } & \mathrm { S } _ { 1 } & \mathrm {~S} _ { 2 } & \mathrm {~S} _ { 3 } \
\text { Accept } & 20 & 30 & 90 \
\text { Further analyze } & 60 & 70 & 15 \
\text { Reject } & 80 & 50 & 30
\end{array}$$
Based on historical data,if the lot is of poor quality,40% of the items are defective.If the lot is fair quality,22% of the items are defective.If the lot is good quality,10 % of the items are defective.The quality control manager inspects one unit from a recent shipment.After inspecting one unit,the manager determines that the unit is not defective.Based on this additional information,what is the revised (posterior)probability for the reject state?

Accepted Answer

A) 24 
B) 52 
C) 18 
D) 39 
E) 78 
A) 24 
B) 52 
C) 18 
D) 39 
E) 78

Question 7

The alternatives 1 and 2 in the following payoff table represent the two possible manufacturing strategies that the EKA manufacturing company can adopt. The level of demand affects the success of both strategies. The states of nature (Si, i = 1, 2, 3) represent the levels of demand for the company products. S1, S2 and S3 characterize high, medium, and low demand, respectively. The payoff values are in thousands of dollars.
$\text { States of nature }$
$\begin{array} { | l | r | r | r |  } 
\hline \text { Alternatives } & \mathbf { s } _ { \mathbf { 1 } }  & \mathbf { s } _ { \mathbf { 2 } } & \mathbf { s } _ { \mathbf { 3 } } \
\hline \text { Strategy 1 } & 110 & 80 & 70 \
\hline \text { Strategy 2 } & 60 & 120 & 50 \
\hline
\end{array}$
-What is the maximum amount that the company would be willing to pay for perfect information?

Accepted Answer

EVPI = 6 EMV)₁ = (.3)(110)+ (.6

Question 8

The __________________ criterion is preferred by pessimistic decision- makers.

Accepted Answer

The answer of The __________________ criterion is preferred by pessimistic...

Question 9

Maximax is a criterion used when making decisions under __________________.

Accepted Answer

A) certainty 
B) uncertainty 
C) risk 
D) alternatives 
A) certainty 
B) uncertainty 
C) risk 
D) alternatives

Question 10

In utility theory,a(n)__________________ decision maker is an individual who will choose the decision alternative having the having the highest expected profit.

Accepted Answer

The answer of In utility theory,a(n)__________________ decision maker is an...

Question 11

The _____________ criterion is best used when a large number of similar decisions will be made under risk.

Accepted Answer

expected m

Question 12

The _______________________ is the difference between the expected payoff that would have been realized had the best alternative action been selected if we know which state of nature has occurred and the expected payoff under risk.

Accepted Answer

expected v

Question 13

When making a decision in an environment of ________________,the decision maker knows which of the states of nature will actually occur.

Accepted Answer

A) certainty 
B) uncertainty 
C) risk 
D) optimism 
E) pessimism 
A) certainty 
B) uncertainty 
C) risk 
D) optimism 
E) pessimism

Question 14

The alternatives 1 and 2 in the following payoff table represent the two possible manufacturing strategies that the EKA manufacturing company can adopt. The level of demand affects the success of both strategies. The states of nature (Si, i = 1, 2, 3) represent the levels of demand for the company products. S1, S2 and S3 characterize high, medium, and low demand, respectively. The payoff values are in thousands of dollars.
$\text { States of nature }$
$\begin{array} { | l | r | r | r |  } 
\hline \text { Alternatives } & \mathbf { s } _ { \mathbf { 1 } }  & \mathbf { s } _ { \mathbf { 2 } } & \mathbf { s } _ { \mathbf { 3 } } \
\hline \text { Strategy 1 } & 110 & 80 & 70 \
\hline \text { Strategy 2 } & 60 & 120 & 50 \
\hline
\end{array}$
-Determine the best alternative (course of action)for the EKA manufacturing company using the maximin criterion.

Accepted Answer

strategy 1
(Min.payoff for alt

Question 15

A company wants to add a new product to its existing line of products.There are two similar candidate products A and B The demand for the new product could be high,medium,or low with probabilities of .25,.5,and .25 respectively.The demand and the corresponding profit for each product is: $$\begin{array} { | l | l | l | l | } 
\hline & \text { High } & \text { Medium } & \text { Low } \
\hline \text { Product A } & 40,000 & 30,000 & 20,000 \
\hline \text { Product B } & 70,000 & 20,000 & 0 \
\hline
\end{array}$$ Based on the expected value criterion,which product should be chosen?

Accepted Answer

A) Product A 
B) Product B 
C) Either product since they have the same expected demand. 
D) Expected demand cannot be used as a basis of decision. 
A) Product A 
B) Product B 
C) Either product since they have the same expected demand. 
D) Expected demand cannot be used as a basis of decision.

Question 16

The quality control manager for the NKA Inc.must decide whether to accept (alternative 1),further analyze (alternative 2),or reject (alternative 3)the shipment (lot)of incoming material.The historical data indicates that there is 30% chance that the lot is poor quality (S1),50% chance that the lot is fair quality (S2),and 20% chance that the lot is good quality (S3).Assume the following payoff table is available.The values in the payoff table are in thousands of dollars. $$\begin{array} { l c c c } 
& { \text { States of Nature } } \
\text { Decision } & \mathrm { S } _ { 1 } & \mathrm {~S} _ { 2 } & \mathrm {~S} _ { 3 } \
\text { Accept } & 20 & 30 & 90 \
\text { Further analyze } & 60 & 70 & 15 \
\text { Reject } & 80 & 50 & 30
\end{array}$$
Based on historical data,if the lot is of poor quality,40% of the items are defective.If the lot is fair quality,22% of the items are defective.If the lot is good quality,10 % of the items are defective.The quality control manager inspects one unit from a recent shipment.After inspecting one unit,the manager determines that the unit is not defective.Based on this additional information,what is the revised (posterior)probability for the further analyze state?

Accepted Answer

A) 24 
B) 52 
C) 18 
D) 39 
E) 78 
A) 24 
B) 52 
C) 18 
D) 39 
E) 78

Question 17

The expected value criterion is used for decision-making under _______________.

Accepted Answer

The answer of The expected value criterion is used for...

Question 18

In utility analysis,a utility curve that shows a rapid increase in utility for initial amounts of money followed by a gradual leveling off for larger amounts of money is appropriate for a risk seeking decision maker.

Accepted Answer

A) True 
 B)False

Question 19

The quality control manager for the NKA Inc.must decide whether to accept (alternative 1),further analyze (alternative 2),or reject (alternative 3)the shipment (lot)of incoming material.The historical data indicates that there is 30% chance that the lot is poor quality (SS1U1B11S1U1B0),50% chance that the lot is fair quality (SS1U1B12S1U1B0),and 20% chance that the lot is good quality (SS1U1B13S1U1B0).Assume the following payoff table is available.The values in the payoff table are in thousands of dollars. $$\begin{array} { l c c c } 
& { \text { States of Nature } } \
\text { Decision } & \mathrm { S } _ { 1 } & \mathrm {~S} _ { 2 } & \mathrm {~S} _ { 3 } \
\text { Accept } & 20 & 30 & 90 \
\text { Further analyze } & 60 & 70 & 15 \
\text { Reject } & 80 & 50 & 30
\end{array}$$
-What alternative action should be selected according to expected monetary value criterion?

Accepted Answer

Choose alternative 2,and furth

Question 20

When making a decision in an environment of ________________,the likelihood of each state of nature can be estimated.

Accepted Answer

A) certainty 
B) uncertainty 
C) risk 
D) alternatives 
E) optimism 
A) certainty 
B) uncertainty 
C) risk 
D) alternatives 
E) optimism

The _________ curve of an individual decision maker is a plot of the decision-maker's utilities versus the profits.

The expected _____________________ is the difference between the expected value of sampling and the cost of sampling.

The expected net gain of sampling equals the _______________ minus the cost of sampling.

The __________________ criterion is preferred by pessimistic decision- makers.

Maximax is a criterion used when making decisions under __________________.

In utility theory,a(n)__________________ decision maker is an individual who will choose the decision alternative having the having the highest expected profit.

The _____________ criterion is best used when a large number of similar decisions will be made under risk.

The _______________________ is the difference between the expected payoff that would have been realized had the best alternative action been selected if we know which state of nature has occurred and the expected payoff under risk.

When making a decision in an environment of ________________,the decision maker knows which of the states of nature will actually occur.

The expected value criterion is used for decision-making under _______________.

In utility analysis,a utility curve that shows a rapid increase in utility for initial amounts of money followed by a gradual leveling off for larger amounts of money is appropriate for a risk seeking decision maker.

When making a decision in an environment of ________________,the likelihood of each state of nature can be estimated.

An Introduction to Business Statistics

Descriptive Statistics

Probability

Discrete Random Variables

Continuous Random Variables

Sampling Distributions

Confidence Intervals

Hypothesis Testing

Statistical Inferences Based on Two Samples

Experimental Design and Analysis of Variance

Correlation Coefficient and Simple Linear Regression Analysis

Multiple Regression and Model Building

Nonparametric Methods

Chi-Square Tests

Time Series Forecasting

Filters

Exam 15: Decision Theory

The _________ curve of an individual decision maker is a plot of the decision-maker's utilities versus the profits.

The expected _____________________ is the difference between the expected value of sampling and the cost of sampling.

The expected net gain of sampling equals the _______________ minus the cost of sampling.

The __________________ criterion is preferred by pessimistic decision- makers.

Maximax is a criterion used when making decisions under __________________.

In utility theory,a(n)__________________ decision maker is an individual who will choose the decision alternative having the having the highest expected profit.

The _____________ criterion is best used when a large number of similar decisions will be made under risk.

The _______________________ is the difference between the expected payoff that would have been realized had the best alternative action been selected if we know which state of nature has occurred and the expected payoff under risk.

When making a decision in an environment of ________________,the decision maker knows which of the states of nature will actually occur.

The expected value criterion is used for decision-making under _______________.

In utility analysis,a utility curve that shows a rapid increase in utility for initial amounts of money followed by a gradual leveling off for larger amounts of money is appropriate for a risk seeking decision maker.

When making a decision in an environment of ________________,the likelihood of each state of nature can be estimated.

An Introduction to Business Statistics

Descriptive Statistics

Probability

Discrete Random Variables

Continuous Random Variables

Sampling Distributions

Confidence Intervals

Hypothesis Testing

Statistical Inferences Based on Two Samples

Experimental Design and Analysis of Variance

Correlation Coefficient and Simple Linear Regression Analysis

Multiple Regression and Model Building

Nonparametric Methods

Chi-Square Tests

Time Series Forecasting

Filters