Question 1

An alternative

Accepted Answer

A) is a course of action intended to solve a problem 
B) is always feasible 
C) is never feasible 
D) is realistic 
A) is a course of action intended to solve a problem 
B) is always feasible 
C) is never feasible 
D) is realistic

Question 2

Exhibit 14.8
The following questions use the information below.
A company needs to buy a new insurance policy.They have three policies to choose from,A,B and C.The policies differ with respect to price,coverage and ease of billing.The company has developed the following AHP tables for price and summary.The other tables are not shown due to space limitations.
   $\begin{array}{|c|c|c|c|c|c|c|c}
\hline & \text { A } & \text { B } & \text { C } & \text { D } & \text { E } & \text { F } & \text { G } \
\hline 1 & & & & & & & \
\hline 2 & & & & & & & \
\hline 3 & & \text { Criterion } & \text { A } & \text { B } & \text { C } & & \
\hline 4 & & \text { Price } & 0.648 & 0.230 & 0.122 & & 0.123 \
\hline 5 & & \text { Coverage } & 0.213 & 0.701 & 0.085 & & 0.320 \
\hline 7 & & \text { Billing } & 0.120 & 0.272 & 0.608 & & 0.557 \
\hline 7 & & \text { Weighted Avg Score: } & 0.215 & 0.404 & 0.381 & & 1.000 \
\hline & & \text { Summary } & & & & & \
\hline
\end{array}$

-Refer to Exhibit 14.8.The Consistency Ratio indicates consistency in the pairwise comparison matrix if the ratio is

Accepted Answer

A)  0.05 
B) 0.10 
C) 0.20 
D)  0.30 
A)  0.05 
B) 0.10 
C) 0.20 
D)  0.30

Question 3

Exhibit 14.4
The following questions are based on the information below.
  
-Refer to Exhibit 14.4.What formula should go in cell D14 of the spreadsheet to compute the EVPI?

Accepted Answer

A) MAXD5:D8)-D12 
B) D12-MIND5:D8) 
C) SUMPRODUCTB12:C12,B10:C10)-MAXD5:D8) 
D) D12-MAXD5:D8) 
A) MAXD5:D8)-D12 
B) D12-MIND5:D8) 
C) SUMPRODUCTB12:C12,B10:C10)-MAXD5:D8) 
D) D12-MAXD5:D8)

Question 4

Exhibit 14.10
The following questions are based on the information below.
An investor is considering 4 investments,W,X,Y,and Z.The payoff from each investment is a function of the economic climate over the next 2 years.The economy can expand or decline.The following payoff matrix has been developed for the decision problem.The investor has estimated the probability of a declining economy at 80% and an expanding economy at 20%.
  
-Refer to Exhibit 14.10.Complete the table using the expected monetary value decision rule and indicate which decision should be made according to that rule.

Accepted Answer

The answer of Exhibit 14.10
The following questions are based on...

Question 5

Exhibit 14.9
The following questions are based on the information below.
An investor is considering 4 investments,W,X,Y,and Z.The payoff from each investment is a function of the economic climate over the next 2 years.The economy can expand or decline.The following payoff matrix has been developed for the investment decision problem.
 $\begin{array}{|c|c|c|c|c|c|}
\hline & \mathrm{A} & \mathrm{B} & \mathrm{C} & \mathrm{D} & E \
\hline 1 & & \begin{array}{|ll} 
& \text { Payoff } \
\text { Matrix } & \
\end{array} & & & \
\hline 2 & & & & & \
\hline 3 & & \text { Economy } & & & \
\hline 4 & \text { Investment } & \text { Decline } & \text { Expand } & & \text { Choice } \
\hline 5 & \mathrm{~W} & 0 & 80 & & \
\hline 6 & \mathrm{X} & \begin{array}{l}
3 \
0 \
\end{array} & 70 & & \
\hline 7 & \mathrm{Y} & \begin{array}{l}
5 \
0 \
\end{array} & 35 & & \
\hline 8 & z & \begin{array}{l}
2 \
0 \
\end{array} & 20 & & \
\hline & \text { Payoffs } & & & & \
\hline
\end{array}$

-Refer to Exhibit 14.9.Assume the formula =MAXB5:C5)was entered in cell D5 and copied to cells D6:D8.What formula should go in cell E5 and get copied to cells E6:E8 to place a "<==" to indicate the choice according to the maximax decision rule?

Accepted Answer

=IFD5=MAX$

Question 6

Exhibit 14.13
The following questions use the information below.
A student wants to buy a new car.She has three cars to choose from,A,B and C.The cars differ with respect to price,performance and looks.The student has developed the following AHP tables for price and summary.The other tables are not shown due to space limitations.
    
-Refer to Exhibit 14.13.What formula should go in cell C7 and copied to cells D7:E7 of the Summary worksheet to compute the Weighted Average Score?

Accepted Answer

=SUMPRODUC

Question 7

Exhibit 14.11
The following questions use the information below.
A company is planning a plant expansion.They can build a large or small plant.The payoffs for the plant depend on the level of consumer demand for the company's products.The company believes that there is an 72% chance that demand for their products will be high and a 28% chance that it will be low.The company can pay a market research firm to survey consumer attitudes towards the company's products.There is a 76% chance that the customers will like the products and a 24% chance that they won't.The payoff matrix and costs of the two plants are listed below.The company believes that if the survey is favorable there is an 87% chance that demand will be high for the products.If the survey is unfavorable there is only a 25% chance that the demand will be high.
 $$\begin{array}{l}
\quad\quad\quad\quad\quad\quad\quad\quad\text { Demand }\
\begin{array} { l c c c } 
 \text { Factory Size } & \text { High } & \text { Low } & \text { Plant Cost \$millian) } \
\hline \text { Large } & 90 & 40 & 5 \
\text { Small } & 55 & 20 & 1
\end{array}
\end{array}$$ The company has developed the following conditional probability table for their decision problem.
  
-Refer to Exhibit 14.11.What formula should go in cell C13 of the probability table?

Accepted Answer

The answer of Exhibit 14.11
The following questions use the information...

Question 8

A payoff matrix depicts versus with payoffs for each intersection cell.

Accepted Answer

A) decision criteria;states of nature. 
B) decision alternatives;potential outcomes. 
C) decision alternatives;states of nature. 
D) decision criteria;potential outcomes. 
A) decision criteria;states of nature. 
B) decision alternatives;potential outcomes. 
C) decision alternatives;states of nature. 
D) decision criteria;potential outcomes.

Question 9

Exhibit 14.9
The following questions are based on the information below.
An investor is considering 4 investments,W,X,Y,and Z.The payoff from each investment is a function of the economic climate over the next 2 years.The economy can expand or decline.The following payoff matrix has been developed for the investment decision problem.
 $\begin{array}{|c|c|c|c|c|c|}
\hline & \mathrm{A} & \mathrm{B} & \mathrm{C} & \mathrm{D} & E \
\hline 1 & & \begin{array}{|ll} 
& \text { Payoff } \
\text { Matrix } & \
\end{array} & & & \
\hline 2 & & & & & \
\hline 3 & & \text { Economy } & & & \
\hline 4 & \text { Investment } & \text { Decline } & \text { Expand } & & \text { Choice } \
\hline 5 & \mathrm{~W} & 0 & 80 & & \
\hline 6 & \mathrm{X} & \begin{array}{l}
3 \
0 \
\end{array} & 70 & & \
\hline 7 & \mathrm{Y} & \begin{array}{l}
5 \
0 \
\end{array} & 35 & & \
\hline 8 & z & \begin{array}{l}
2 \
0 \
\end{array} & 20 & & \
\hline & \text { Payoffs } & & & & \
\hline
\end{array}$

-Refer to Exhibit 14.9.Assume the formula =MINB5:C5)was entered in cell D5 and copied to cells D6:D8.What formula should go in cell E5 and get copied to cells E6:E8 to place a "<==" to indicate the choice according to the maximin decision rule?

Accepted Answer

=IFD5=MAX$

Question 10

A "risk averse" decision maker assigns the relative utility to any payoff but has an)marginal utility for increased payoffs.

Accepted Answer

A) largest;increasing 
B) largest;diminishing 
C) smallest;diminishing 
D) smallest;increasing 
A) largest;increasing 
B) largest;diminishing 
C) smallest;diminishing 
D) smallest;increasing

Question 11

Exhibit 14.1
The following questions are based on the information below.
An investor is considering 4 investments,A,B,C and leaving his money in the bank.The payoff from each investment is a function of the economic climate over the next 2 years.The economy can expand or decline.The following payoff matrix has been developed for the decision problem.
  
-Refer to Exhibit 14.1.What decision should be made according to the maximin decision rule?

Accepted Answer

A) A 
B) B 
C) C 
D) Bank 
A) A 
B) B 
C) C 
D) Bank

Question 12

Exhibit 14.9
The following questions are based on the information below.
An investor is considering 4 investments,W,X,Y,and Z.The payoff from each investment is a function of the economic climate over the next 2 years.The economy can expand or decline.The following payoff matrix has been developed for the investment decision problem.
 $\begin{array}{|c|c|c|c|c|c|}
\hline & \mathrm{A} & \mathrm{B} & \mathrm{C} & \mathrm{D} & E \
\hline 1 & & \begin{array}{|ll} 
& \text { Payoff } \
\text { Matrix } & \
\end{array} & & & \
\hline 2 & & & & & \
\hline 3 & & \text { Economy } & & & \
\hline 4 & \text { Investment } & \text { Decline } & \text { Expand } & & \text { Choice } \
\hline 5 & \mathrm{~W} & 0 & 80 & & \
\hline 6 & \mathrm{X} & \begin{array}{l}
3 \
0 \
\end{array} & 70 & & \
\hline 7 & \mathrm{Y} & \begin{array}{l}
5 \
0 \
\end{array} & 35 & & \
\hline 8 & z & \begin{array}{l}
2 \
0 \
\end{array} & 20 & & \
\hline & \text { Payoffs } & & & & \
\hline
\end{array}$

-Refer to Exhibit 14.9.What formula should go in cell D5 of the following Regret Table to implement the minimax regret decision rule? Assume that cells B5:C8 contain the regret values for the problem.
 $\begin{array}{|c|c|c|c|c|}
\hline & \text { A } & \text { B } & \text { C } & \text { D } \
\hline 1 & & \text { Regret Matrix } & & \
\hline 2 & & & & \
\hline 3 & & \text { Economy } & & \
\hline 4 & \text { Investment } & \text { Decline } & \text { Expand } & \
\hline 5 & \text { W } & & & \
\hline 6 & \mathrm{X} & & & \
\hline 7 & \mathrm{Y} & & & \
\hline 8 & \text { Z } & & & \
\hline & \text { Regret } & & & \
\hline
\end{array}$

Accepted Answer

The answer of Exhibit 14.9
The following questions are based on...

Question 13

The decision with the smallest expected opportunity loss EOL)will also have the

Accepted Answer

A) smallest EMV. 
B) largest EMV. 
C) smallest regret. 
D) largest regret. 
A) smallest EMV. 
B) largest EMV. 
C) smallest regret. 
D) largest regret.

Question 14

Exhibit 14.6
The following questions use the information below.
A company is planning a plant expansion.They can build a large or small plant.The payoffs for the plant depend on the level of consumer demand for the company's products.The company believes that there is an 69% chance that demand for their products will be high and a 31% chance that it will be low.The company can pay a market research firm to survey consumer attitudes towards the company's products.There is a 63% chance that the customers will like the products and a 37% chance that they won't.The payoff matrix and costs of the two plants are listed below.The company believes that if the survey is favorable there is a 92% chance that demand will be high for the products.If the survey is unfavorable there is only a 30% chance that the demand will be high.The following decision tree has been built for this problem.The company has computed that the expected monetary value of the best decision without sample information is 154.35 million.The company has developed the following conditional probability table for their decision problem.
  
-Refer to Exhibit 14.6.What is PF∩H),where F = favorable response and H = high demand?

Accepted Answer

A) .58 
B) .63 
C) .84 
D) .92 
A) .58 
B) .63 
C) .84 
D) .92

Question 15

What is the formula for the exponential utility function Ux)?

Accepted Answer

A) −e−x/R 
B) 1 + e−x/R 
C) 1 − ex/R 
D) 1 − e−x/R 
A) −e−x/R 
B) 1 + e−x/R 
C) 1 − ex/R 
D) 1 − e−x/R

Question 16

The correspond to future events that are not under the control of the decision maker.

Accepted Answer

A) payoffs 
B) states of nature 
C) criteria 
D) alternatives 
A) payoffs 
B) states of nature 
C) criteria 
D) alternatives

Question 17

Exhibit 14.3
The following questions are based on the information below.
An investor is considering 4 investments,A,B,C and leaving his money in the bank.The payoff from each investment is a function of the economic climate over the next 2 years.The economy can expand or decline.The following payoff matrix has been developed for the decision problem.The investor has estimated the probability of a declining economy at 70% and an expanding economy at 30%.
  
-Refer to Exhibit 14.3.What decision should be made according to the expected regret decision rule?

Accepted Answer

A) A 
B) B 
C) C 
D) Bank 
A) A 
B) B 
C) C 
D) Bank

Question 18

Which decision rule optimistically assumes that nature will always be "on our side" regardless of what decision we make?

Accepted Answer

A) maximax decision rule. 
B) maximin decision rule. 
C) minimax regret decision rule. 
D) minimin decision rule. 
A) maximax decision rule. 
B) maximin decision rule. 
C) minimax regret decision rule. 
D) minimin decision rule.

Question 19

Exhibit 14.10
The following questions are based on the information below.
An investor is considering 4 investments,W,X,Y,and Z.The payoff from each investment is a function of the economic climate over the next 2 years.The economy can expand or decline.The following payoff matrix has been developed for the decision problem.The investor has estimated the probability of a declining economy at 80% and an expanding economy at 20%.
  
-Refer to Exhibit 14.10.Complete the Regret Table according to the expected regret decision rule.

Accepted Answer

The answer of Exhibit 14.10
The following questions are based on...

Question 20

Exhibit 14.12
The following questions use the information below.A decision maker is faced with two alternatives.
Alternative 1: Receive $40,000 with certainty
Alternative 2: Receive $80,000 with probability p and lose $5,000 with probability 1 − p).
The decision maker has determined that she is indifferent between the two alternatives when p = 0.7.
-Refer to Exhibit 14.12.What is the decision maker's risk premium for this problem?

Accepted Answer

The answer of Exhibit 14.12
The following questions use the information...

An alternative

Exhibit 14.4 The following questions are based on the information below. -Refer to Exhibit 14.4.What formula should go in cell D14 of the spreadsheet to compute the EVPI?

A payoff matrix depicts versus with payoffs for each intersection cell.

A "risk averse" decision maker assigns the relative utility to any payoff but has an)marginal utility for increased payoffs.

The decision with the smallest expected opportunity loss EOL)will also have the

What is the formula for the exponential utility function Ux)?

The correspond to future events that are not under the control of the decision maker.

Which decision rule optimistically assumes that nature will always be "on our side" regardless of what decision we make?

Introduction to Modeling and Decision Analysis

Introduction to Optimization and Linear Programming

Modeling and Solving Lp Problems in a Spreadsheet

Sensitivity Analysis and the Simplex Method

Network Modeling

Integer Linear Programming

Goal Programming and Multiple Objective Optimization

Nonlinear Programming and Evolutionary Optimization

Regression Analysis

Data Mining

Time Series Forecasting

Introduction to Simulation Using Analytic Solver Platform

Queuing Theory

Project Management Online

Filters

Exam 14: Decision Analysis

An alternative

Exhibit 14.4 The following questions are based on the information below. -Refer to Exhibit 14.4.What formula should go in cell D14 of the spreadsheet to compute the EVPI?

A payoff matrix depicts versus with payoffs for each intersection cell.

A "risk averse" decision maker assigns the relative utility to any payoff but has an)marginal utility for increased payoffs.

The decision with the smallest expected opportunity loss EOL)will also have the

What is the formula for the exponential utility function Ux)?

The correspond to future events that are not under the control of the decision maker.

Which decision rule optimistically assumes that nature will always be "on our side" regardless of what decision we make?

Introduction to Modeling and Decision Analysis

Introduction to Optimization and Linear Programming

Modeling and Solving Lp Problems in a Spreadsheet

Sensitivity Analysis and the Simplex Method

Network Modeling

Integer Linear Programming

Goal Programming and Multiple Objective Optimization

Nonlinear Programming and Evolutionary Optimization

Regression Analysis

Data Mining

Time Series Forecasting

Introduction to Simulation Using Analytic Solver Platform

Queuing Theory

Project Management Online

Filters