Question 1

If a decision maker has to make a certain decision only once,expected monetary value is a good indication of the payoff associated with the decision.

Accepted Answer

A) True 
 B)False

Question 2

What is the expected value with perfect information of the following decision table?

Accepted Answer

A) 5,000 
B) 10,000 
C) 40,000 
D) 60,000 
E) 70,000 
A) 5,000 
B) 10,000 
C) 40,000 
D) 60,000 
E) 70,000

Question 3

A decision maker who uses the maximin criterion when solving a problem under conditions of uncertainty is

Accepted Answer

A) an optimist. 
B) a pessimist. 
C) an economist. 
D) an optometrist. 
E) making a serious mistake;maximin is not appropriate for conditions of uncertainty. 
A) an optimist. 
B) a pessimist. 
C) an economist. 
D) an optometrist. 
E) making a serious mistake;maximin is not appropriate for conditions of uncertainty.

Question 4

The expected monetary value of a decision alternative is the sum of all possible payoffs from the alternative,each weighted by the probability of that payoff occurring.

Accepted Answer

A) True 
 B)False

Question 5

What is the EMV for Option 2 in the following decision table?

Accepted Answer

A) 50 
B) 100 
C) 170 
D) 200 
E) 350 
A) 50 
B) 100 
C) 170 
D) 200 
E) 350

Question 6

Miles is considering buying a new pickup truck for his lawn service firm.The economy in town seems to be growing,and he is wondering whether he should opt for a subcompact,compact,or full-size pickup truck.The smaller truck would have better fuel economy,but would sacrifice capacity and some durability.A friend at the Bureau of Economic Research told him that there is a 30% chance of lower gas prices in his area this year,a 20% chance of higher gas prices,and a 50% chance that gas prices will stay roughly unchanged.Based on this information,Miles has developed a decision table that indicates the profit amount he would end up with after a year for each combination of truck and gas prices.Develop a decision tree for this situation and indicate which type of truck he should select.

Accepted Answer

The tree appears in the drawin

Question 7

A primary advantage of decision trees compared to decision tables is that decision trees

Accepted Answer

A) are more accurate. 
B) provide a graphic. 
C) are smaller. 
D) are cheaper. 
E) can be used for sequential problems. 
A) are more accurate. 
B) provide a graphic. 
C) are smaller. 
D) are cheaper. 
E) can be used for sequential problems.

Question 8

________ is the difference between the payoff under perfect information and the payoff under risk.

Accepted Answer

Expected v

Question 9

A retailer is deciding how many of a certain product to stock.The historical probability distribution of sales for this product is 0 units,0.2;1 unit,0.3;2 units,0.4,and 3 units,0.1.The product costs $8 per unit and sells for $25 per unit.The largest conditional value (profit)in the entire payoff table for this scenario is

Accepted Answer

A) $-24 profit. 
B) $-8 profit. 
C) $17 profit. 
D) $51 profit. 
E) $75 profit. 
A) $-24 profit. 
B) $-8 profit. 
C) $17 profit. 
D) $51 profit. 
E) $75 profit.

Question 10

Analytic decision making is based on logic and considers all available data and possible alternatives.

Accepted Answer

A) True 
 B)False

Question 11

The expected value of perfect information (EVPI)is the

Accepted Answer

A) payoff for a decision made under perfect information. 
B) payoff under minimum risk. 
C) average expected payoff. 
D) difference between the payoff under perfect information and the payoff under risk. 
E) payoff for a decision made under maximum risk. 
A) payoff for a decision made under perfect information. 
B) payoff under minimum risk. 
C) average expected payoff. 
D) difference between the payoff under perfect information and the payoff under risk. 
E) payoff for a decision made under maximum risk.

Question 12

A decision tree is a(n)

Accepted Answer

A) algebraic representation of alternatives and states of nature. 
B) behavioral representation of alternatives and states of nature. 
C) matrix representation of alternatives and states of nature. 
D) graphic representation of alternatives and states of nature. 
E) tabular representation of alternatives and states of nature. 
A) algebraic representation of alternatives and states of nature. 
B) behavioral representation of alternatives and states of nature. 
C) matrix representation of alternatives and states of nature. 
D) graphic representation of alternatives and states of nature. 
E) tabular representation of alternatives and states of nature.

Question 13

What is the EMV for Option 1 in the following decision table?

Accepted Answer

A) 10,000 
B) 18,000 
C) 20,000 
D) 22,000 
E) 30,000 
A) 10,000 
B) 18,000 
C) 20,000 
D) 22,000 
E) 30,000

Question 14

In the context of decision-making,define alternative.

Accepted Answer

An alternative is a

Question 15

Daily sales of bread by Salvador Monella's Baking Company follow the historical pattern shown in the table below.It costs the bakery 50 cents to produce a loaf of bread,which sells for 95 cents.Any bread unsold at the end of the day is sold to the parish jail for 25 cents per loaf.Construct the decision table of conditional payoffs.How many loaves should Sal bake each day in order to maximize contribution?

Accepted Answer

The Excel OM decision table an

Question 16

In terms of decision theory,an occurrence or situation over which the decision maker has no control is called a(n)

Accepted Answer

A) decision under uncertainty. 
B) decision tree. 
C) state of nature. 
D) alternative. 
E) probable state. 
A) decision under uncertainty. 
B) decision tree. 
C) state of nature. 
D) alternative. 
E) probable state.

Question 17

Identify and describe three methods used for decision making under conditions of uncertainty.

Accepted Answer

The three decision rules are maximax,max

Question 18

The campus bookstore sells stadium blankets embroidered with the university crest.The blankets must be purchased in bundles of one dozen each.Each blanket in the bundle costs $65,and will sell for $90.Blankets unsold by graduation will be clearance priced at $20.The bookstore estimates that demand patterns will follow the table below.
a.Build the decision table.
b.What is the maximum expected value?
c.How many bundles should be purchased?

Accepted Answer

(a)See the table below; (b)the

Question 19

The maximin criterion is pessimistic,while the maximax criterion is optimistic.

Accepted Answer

A) True 
 B)False

Question 20

A local business owner is a bit uncertain of the demand forecast,and is timidly approaching the capacity decision for a business he is about to open.Here's how he describes the decisions that confront him over the next two years."First,I have to choose between building a large plant initially and building a small one that has room to expand.Or I could rent now,and decide whether to build next year.That one,too,could be the large version or the small.If I build small,then after one year,I can review how good business was,and decide whether to expand.If I build large,there is no further option to enlarge."Do not concern yourself with probabilities or payoff values .Simply draw the tree that illustrates the manager's decision alternatives and the chance events that go along with them.Use standard symbols for decision tree construction,and label all parts of your diagram carefully.To simplify,assume that business in the first year,and in the second,can be only "good" or "bad."

Accepted Answer

The answer of A local business owner is a bit...

Exam 21: Decision-Making Tools

If a decision maker has to make a certain decision only once,expected monetary value is a good indication of the payoff associated with the decision.

What is the expected value with perfect information of the following decision table?

A decision maker who uses the maximin criterion when solving a problem under conditions of uncertainty is

The expected monetary value of a decision alternative is the sum of all possible payoffs from the alternative,each weighted by the probability of that payoff occurring.

What is the EMV for Option 2 in the following decision table?

A primary advantage of decision trees compared to decision tables is that decision trees

________ is the difference between the payoff under perfect information and the payoff under risk.

Analytic decision making is based on logic and considers all available data and possible alternatives.

The expected value of perfect information (EVPI)is the

A decision tree is a(n)

What is the EMV for Option 1 in the following decision table?

In the context of decision-making,define alternative.

In terms of decision theory,an occurrence or situation over which the decision maker has no control is called a(n)

Identify and describe three methods used for decision making under conditions of uncertainty.

The maximin criterion is pessimistic,while the maximax criterion is optimistic.

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Outsourcing As a Supply-Chain Strategy

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Linear Programming

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