Question 1

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

Accepted Answer

A) True 
 B)False  True

Question 2

Refer to the following payoff table:
 
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 expected value of perfect information?

Accepted Answer

A)  40 
B)  45 
C)  75 
D)  85 
E)  100 
A)  40 
B)  45 
C)  75 
D)  85 
E)  100 B

Question 3

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.
What is the expected payoff from selecting script #1?

Accepted Answer

A)  $150 million 
B)  $90.6 million 
C)  $84 million 
D)  $72 million 
E)  $60 million 
A)  $150 million 
B)  $90.6 million 
C)  $84 million 
D)  $72 million 
E)  $60 million B

Question 4

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.
What is the probability that the statistics book would wind up being placed with a smaller publisher?

Accepted Answer

A)  0.6 
B)  0.5 
C)  0.4 
D)  0.3 
E)  0 
A)  0.6 
B)  0.5 
C)  0.4 
D)  0.3 
E)  0

Question 5

The operations manager for a local bus company wants to decide whether he should purchase a small, medium, or large new bus for his company. He estimates that the annual profits (in $000) will vary depending upon whether passenger demand is low, moderate, or high, as follows.
 
What is the expected annual profit for the bus that he will decide to purchase using Bayes' decision rule?

Accepted Answer

A)  $15,000 
B)  $61,000 
C)  $69,000 
D)  $72,000 
E)  $87,000 
A)  $15,000 
B)  $61,000 
C)  $69,000 
D)  $72,000 
E)  $87,000

Question 6

Two people who face the same problem and use the same decision-making methodology must always arrive at the same decision.

Accepted Answer

A) True 
 B)False

Question 7

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.
What is the expected payoff for the decision to write the statistics 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 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.
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 
A)  $150 million 
B)  $90.6 million 
C)  $84 million 
D)  $72 million 
E)  $60 million

Question 9

Payoff tables may include only non-negative numbers.

Accepted Answer

A) True 
 B)False

Question 10

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.
What is the expected payoff from selecting script #2?

Accepted Answer

A)  $150 million 
B)  $90.6 million 
C)  $84 million 
D)  $72 million 
E)  $60 million 
A)  $150 million 
B)  $90.6 million 
C)  $84 million 
D)  $72 million 
E)  $60 million

Question 11

Based on the following payoff table, answer the following:
$$\begin{array} { | l | r | r | } 
\hline { \text { Alternative } } &  { \text { Yes } } & { \text { No } } \
\hline \text { Brmall } & 10 & 30 \
\hline \text { Medium } & 20 & 40 \
\hline \text { Mediurn Large } & 30 & 45 \
\hline \text { Large } & 40 & 35 \
\hline \text { Extra Large } & 60 & 20 \
\hline \text { Prior Probability } & 0.3 & 0.7 \
\hline
\end{array}$$
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 12

Based on the following payoff table, answer the following:
$$\begin{array} { | l | r | r | } 
\hline { \text { Alternative } } & \text { High } & { \text { Low } } \
\hline \text { Buy } & 90 & - 10 \
\hline \text { Rent } & 70 & 40 \
\hline \text { Lease } & 60 & 55 \
\hline \text { Prior Probability } & 0.4 & 0.6 \
\hline
\end{array}$$
The Bayes' decision rule 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 13

Based on the following payoff table, answer the following:
$$\begin{array} { | l | r | r | } 
\hline { \text { Alternative } } & \text { High } & { \text { Low } } \
\hline \text { Buy } & 90 & - 10 \
\hline \text { Rent } & 70 & 40 \
\hline \text { Lease } & 60 & 55 \
\hline \text { Prior Probability } & 0.4 & 0.6 \
\hline
\end{array}$$
The maximax 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 14

Refer to the following payoff table:
 
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 S2 given that the research predicts S2?

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 15

The operations manager for a local bus company wants to decide whether he should purchase a small, medium, or large new bus for his company. He estimates that the annual profits (in $000) will vary depending upon whether passenger demand is low, moderate, or high, as follows.
 
What is his expected value of perfect information?

Accepted Answer

A)  $15,000 
B)  $61,000 
C)  $69,000 
D)  $72,000 
E)  $87,000 
A)  $15,000 
B)  $61,000 
C)  $69,000 
D)  $72,000 
E)  $87,000

Question 16

The construction manager for ABC Construction must decide whether to build single family homes, apartments, or condominiums. He estimates annual profits (in $000) will vary with the population trend as follows:
 
If he uses Bayes' decision rule, which kind of dwellings will he decide to build?

Accepted Answer

A)  Single family 
B)  Apartments 
C)  Condos 
D)  Either single family or apartments 
E)  Either apartments or condos 
A)  Single family 
B)  Apartments 
C)  Condos 
D)  Either single family or apartments 
E)  Either apartments or condos

Question 17

Prior probabilities refer to the relative likelihood of possible states of nature.

Accepted Answer

A) True 
 B)False

Question 18

The construction manager for ABC Construction must decide whether to build single family homes, apartments, or condominiums. He estimates annual profits (in $000) will vary with the population trend as follows:
 
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 
A)  $187,000 
B)  $132,000 
C)  $123,000 
D)  $65,000 
E)  $55,000

Question 19

What is the role of the group facilitator in decision conferencing?

Accepted Answer

A)  Lead the group to the desired outcome. 
B)  Structure and focus discussions. 
C)  Provide mathematical support for decision analysis. 
D)  Determine the states of nature. 
E)  Determine the payoffs for each alternative. 
A)  Lead the group to the desired outcome. 
B)  Structure and focus discussions. 
C)  Provide mathematical support for decision analysis. 
D)  Determine the states of nature. 
E)  Determine the payoffs for each alternative.

Question 20

The maximum likelihood criterion ignores the payoffs for states of nature other than the most likely one.

Accepted Answer

A) True 
 B)False

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

Two people who face the same problem and use the same decision-making methodology must always arrive at the same decision.

Payoff tables may include only non-negative numbers.

Based on the following payoff table, answer the following: Alternative Yes No Brmall 10 30 Medium 20 40 Mediurn Large 30 45 Large 40 35 Extra Large 60 20 Prior Probability 0.3 0.7 The expected value of perfect information is:

Based on the following payoff table, answer the following: Alternative High Low Buy 90 -10 Rent 70 40 Lease 60 55 Prior Probability 0.4 0.6 The Bayes' decision rule strategy is:

Based on the following payoff table, answer the following: Alternative High Low Buy 90 -10 Rent 70 40 Lease 60 55 Prior Probability 0.4 0.6 The maximax strategy is:

The construction manager for ABC Construction must decide whether to build single family homes, apartments, or condominiums. He estimates annual profits (in $000) will vary with the population trend as follows: If he uses Bayes' decision rule, which kind of dwellings will he decide to build?

Prior probabilities refer to the relative likelihood of possible states of nature.

The construction manager for ABC Construction must decide whether to build single family homes, apartments, or condominiums. He estimates annual profits (in $000) will vary with the population trend as follows: What is his expected value of perfect information?

What is the role of the group facilitator in decision conferencing?

The maximum likelihood criterion ignores the payoffs for states of nature other than the most likely one.

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

Forecasting

Queueing Models

Computer Simulation: Basic Concepts

Computer Simulation With Analytic Solver

Filters

Exam 9: Decision Analysis

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

Two people who face the same problem and use the same decision-making methodology must always arrive at the same decision.

Payoff tables may include only non-negative numbers.

Based on the following payoff table, answer the following: Alternative Yes No Brmall 10 30 Medium 20 40 Mediurn Large 30 45 Large 40 35 Extra Large 60 20 Prior Probability 0.3 0.7 The expected value of perfect information is:

Based on the following payoff table, answer the following: Alternative High Low Buy 90 -10 Rent 70 40 Lease 60 55 Prior Probability 0.4 0.6 The Bayes' decision rule strategy is:

Based on the following payoff table, answer the following: Alternative High Low Buy 90 -10 Rent 70 40 Lease 60 55 Prior Probability 0.4 0.6 The maximax strategy is:

The construction manager for ABC Construction must decide whether to build single family homes, apartments, or condominiums. He estimates annual profits (in $000) will vary with the population trend as follows: If he uses Bayes' decision rule, which kind of dwellings will he decide to build?

Prior probabilities refer to the relative likelihood of possible states of nature.

The construction manager for ABC Construction must decide whether to build single family homes, apartments, or condominiums. He estimates annual profits (in $000) will vary with the population trend as follows: What is his expected value of perfect information?

What is the role of the group facilitator in decision conferencing?

The maximum likelihood criterion ignores the payoffs for states of nature other than the most likely one.

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

Forecasting

Queueing Models

Computer Simulation: Basic Concepts

Computer Simulation With Analytic Solver

Filters