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 maximum likelihood strategy is:

A) small. B) medium. C) medium large. D) large. E) extra large. A) small. B) medium. C) medium large. D) large. E) extra large.

Based on the following payoff table, answer the following: \[\begin{array} { | l | r | r | r |} \hline { \text { Alternative } } & \text { High } & { \text { Medium } } & { \text { Low } } \\ \hline \text { A } & 20 & 20 & 5 \\ \hline \mathrm { B } & 25 & 30 & 11 \\ \hline \mathrm { C } & 30 & 12 & 13 \\ \hline \mathrm { D } & 10 & 12 & 12 \\ \hline \mathrm { E } & 50 & 40 & - 28 \\ \hline \text { Prior Probability } & 0.3 & 0.2 & 0.5 \\ \hline \end{array}\] The maximax strategy is:

A) A. B) B. C) C. D) D. E) E. A) A. B) B. C) C. D) D. E) E.

Based on the following payoff table, answer the following: \[\begin{array} { | l | r | r | r |} \hline { \text { Alternative } } & \text { High } & { \text { Medium } } & { \text { Low } } \\ \hline \text { A } & 20 & 20 & 5 \\ \hline \mathrm { B } & 25 & 30 & 11 \\ \hline \mathrm { C } & 30 & 12 & 13 \\ \hline \mathrm { D } & 10 & 12 & 12 \\ \hline \mathrm { E } & 50 & 40 & - 28 \\ \hline \text { Prior Probability } & 0.3 & 0.2 & 0.5 \\ \hline \end{array}\] The expected value of perfect information is:

A) ?28. B) 0. C) 10.5. D) 19. E) 23. A) ?28. B) 0. C) 10.5. D) 19. E) 23.

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 expected value of perfect information is:

A) 12. B) 55. C) 57. D) 69. E) 90. A) 12. B) 55. C) 57. D) 69. E) 90.

Exam 9: Decision Analysis

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 probability that script #1 will be a success, but its sequel will not?

(Multiple Choice)

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Question 21

Graphical analysis can only be used in sensitivity analysis for those problems that have two decision alternatives.

(True/False)

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Question 22

Utilities can be useful when monetary values do not accurately reflect the true values of an outcome.

(True/False)

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Question 23

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 maximum likelihood strategy is:

(Multiple Choice)

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Question 24

Determining the worst payoff for each alternative and choosing the alternative with the "best worst" is the criterion called:

(Multiple Choice)

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Question 25

An advantage of payoff tables compared to decision trees is that they permit us to analyze situations involving sequential decisions.

(True/False)

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Question 26

Most people occupy a middle ground and are classified as risk neutral.

(True/False)

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Question 27

Sensitivity analysis may be useful in decision analysis since prior probabilities may be inaccurate.

(True/False)

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Question 28

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. Given that the research is done, what is the joint probability that the state of nature is S1 and the research predicts S1?

(Multiple Choice)

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Question 29

Based on the following payoff table, answer the following: Alternative High Medium Low A 20 20 5 25 30 11 30 12 13 10 12 12 50 40 -28 Prior Probability 0.3 0.2 0.5 The maximax strategy is:

(Multiple Choice)

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Question 30

The maximum likelihood criterion says to focus on the largest payoff.

(True/False)

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Question 31

A event node in a decision tree indicates that a decision needs to be made at that point.

(True/False)

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Question 32

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. If he uses the maximum likelihood criterion, which size bus will he decide to purchase?

(Multiple Choice)

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Question 33

Based on the following payoff table, answer the following: Alternative High Medium Low A 20 20 5 25 30 11 30 12 13 10 12 12 50 40 -28 Prior Probability 0.3 0.2 0.5 The expected value of perfect information is:

(Multiple Choice)

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Question 34

An example of maximax decision making is a person buying lottery tickets in hopes of a very big payoff.

(True/False)

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Question 35

The maximax approach is an optimistic strategy.

(True/False)

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Question 36

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 expected value of perfect information is:

(Multiple Choice)

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Question 37

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 optimum decision alternative?

(Multiple Choice)

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Question 38

Testing how a problem solution reacts to changes in one or more of the model parameters is called:

(Multiple Choice)

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Question 39

The exponential utility function assumes a constant aversion to risk.

(True/False)

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Question 40

Graphical analysis can only be used in sensitivity analysis for those problems that have two decision alternatives.

Utilities can be useful when monetary values do not accurately reflect the true values of an outcome.

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 maximum likelihood strategy is:

Determining the worst payoff for each alternative and choosing the alternative with the "best worst" is the criterion called:

An advantage of payoff tables compared to decision trees is that they permit us to analyze situations involving sequential decisions.

Most people occupy a middle ground and are classified as risk neutral.

Sensitivity analysis may be useful in decision analysis since prior probabilities may be inaccurate.

Based on the following payoff table, answer the following: Alternative High Medium Low A 20 20 5 25 30 11 30 12 13 10 12 12 50 40 -28 Prior Probability 0.3 0.2 0.5 The maximax strategy is:

The maximum likelihood criterion says to focus on the largest payoff.

A event node in a decision tree indicates that a decision needs to be made at that point.

Based on the following payoff table, answer the following: Alternative High Medium Low A 20 20 5 25 30 11 30 12 13 10 12 12 50 40 -28 Prior Probability 0.3 0.2 0.5 The expected value of perfect information is:

An example of maximax decision making is a person buying lottery tickets in hopes of a very big payoff.

The maximax approach is an optimistic strategy.

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 expected value of perfect information is:

Testing how a problem solution reacts to changes in one or more of the model parameters is called:

The exponential utility function assumes a constant aversion to risk.

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

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