Question 1

Which one of the following statements is not correct when making decisions?

Accepted Answer

A)  The sum of the state of nature probabilities must be 1. 
B)  Every probability must be greater than or equal to 0. 
C)  All probabilities are assumed to be equal. 
D)  Probabilities are used to compute expected values. 
E)  Perfect information assumes that the state of nature that will actually occur is known. 
A)  The sum of the state of nature probabilities must be 1. 
B)  Every probability must be greater than or equal to 0. 
C)  All probabilities are assumed to be equal. 
D)  Probabilities are used to compute expected values. 
E)  Perfect information assumes that the state of nature that will actually occur is known.

Question 2

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 Bayes' decision rule strategy is:

Accepted Answer

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

Question 3

A posterior probability is a revised probability of a state of nature after doing a test or survey to refine the prior probability.

Accepted Answer

A) True 
 B)False

Question 4

A risk seeker has a decreasing marginal utility for money.

Accepted Answer

A) True 
 B)False

Question 5

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 maximum likelihood 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 6

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 unconditional probability that the research predicts S2?

Accepted Answer

A)  0.32 
B)  0.4 
C)  0.44 
D)  0.56 
E)  0.6 
A)  0.32 
B)  0.4 
C)  0.44 
D)  0.56 
E)  0.6

Question 7

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 maximin 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 8

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 Bayes' decision rule, which size bus will he decide to purchase?

Accepted Answer

A)  Small 
B)  Medium 
C)  Large 
D)  Either small or medium 
E)  Either medium or large 
A)  Small 
B)  Medium 
C)  Large 
D)  Either small or medium 
E)  Either medium or large

Question 9

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 not done, what is the expected payoff using Bayes' decision rule?

Accepted Answer

A)  0 
B)  29 
C)  40 
D)  75 
E)  100 
A)  0 
B)  29 
C)  40 
D)  75 
E)  100

Question 10

The EVPI indicates an upper limit in the amount a decision-maker should be willing to spend to obtain information.

Accepted Answer

A) True 
 B)False

Question 11

Bayes' theorem is a formula for determining prior probabilities of a state of nature.

Accepted Answer

A) True 
 B)False

Question 12

States of nature are alternatives available to a decision maker.

Accepted Answer

A) True 
 B)False

Question 13

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 maximin strategy is:

Accepted Answer

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

Question 14

The maximin criterion is an optimistic criterion.

Accepted Answer

A) True 
 B)False

Question 15

Payoffs always represent profits in decision analysis problems.

Accepted Answer

A) True 
 B)False

Question 16

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 unconditional probability that the research predicts S1?

Accepted Answer

A)  0.32 
B)  0.4 
C)  0.44 
D)  0.56 
E)  0.6 
A)  0.32 
B)  0.4 
C)  0.44 
D)  0.56 
E)  0.6

Question 17

The maximin approach involves choosing the alternative with the highest payoff.

Accepted Answer

A) True 
 B)False

Question 18

The maximin criterion refers to:

Accepted Answer

A)  minimizing the maximum return. 
B)  maximizing the minimum return. 
C)  choosing the alternative with the highest payoff. 
D)  choosing the alternative with the minimum payoff. 
E)  None of the answer choices is correct. 
A)  minimizing the maximum return. 
B)  maximizing the minimum return. 
C)  choosing the alternative with the highest payoff. 
D)  choosing the alternative with the minimum payoff. 
E)  None of the answer choices is correct.

Question 19

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 the maximum likelihood criterion, 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 20

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 Bayes' decision rule strategy is:

Accepted Answer

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

Which one of the following statements is not correct when making decisions?

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 Bayes' decision rule strategy is:

A posterior probability is a revised probability of a state of nature after doing a test or survey to refine the prior probability.

A risk seeker has a decreasing marginal utility for money.

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 maximum likelihood 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 maximin strategy is:

The EVPI indicates an upper limit in the amount a decision-maker should be willing to spend to obtain information.

Bayes' theorem is a formula for determining prior probabilities of a state of nature.

States of nature are alternatives available to a decision maker.

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 maximin strategy is:

The maximin criterion is an optimistic criterion.

Payoffs always represent profits in decision analysis problems.

The maximin approach involves choosing the alternative with the highest payoff.

The maximin criterion refers to:

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 Bayes' decision rule strategy is:

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

Which one of the following statements is not correct when making decisions?

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 Bayes' decision rule strategy is:

A posterior probability is a revised probability of a state of nature after doing a test or survey to refine the prior probability.

A risk seeker has a decreasing marginal utility for money.

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 maximum likelihood 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 maximin strategy is:

The EVPI indicates an upper limit in the amount a decision-maker should be willing to spend to obtain information.

Bayes' theorem is a formula for determining prior probabilities of a state of nature.

States of nature are alternatives available to a decision maker.

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 maximin strategy is:

The maximin criterion is an optimistic criterion.

Payoffs always represent profits in decision analysis problems.

The maximin approach involves choosing the alternative with the highest payoff.

The maximin criterion refers to:

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 Bayes' decision rule strategy is:

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