Question 1

The first step,and a key element,in the decision-making process is to:

Accepted Answer

A) consult a specialist. 
B) clearly define the problem. 
C) develop objectives. 
D) monitor the results. 
E) select the best alternative. 
A) consult a specialist. 
B) clearly define the problem. 
C) develop objectives. 
D) monitor the results. 
E) select the best alternative. B

Question 2

The following decision tree has how many state of nature nodes?

Accepted Answer

A) 0 
B) 1 
C) 2 
D) 3 
E) 4 
A) 0 
B) 1 
C) 2 
D) 3 
E) 4 B

Question 3

What is the outcome of an alternative/state of nature combination called?

Accepted Answer

A) price 
B) conditional value 
C) expected value 
D) conditional probability 
E) conditional expectation 
A) price 
B) conditional value 
C) expected value 
D) conditional probability 
E) conditional expectation B

Question 4

A poker player is considering three different options after his opponent bet 200 before him.If the player folds,he will lose instantly.If the player calls,he figures he will win half the time.If he raises,he figures that the opposing player will not re-raise him,but rather will either call or fold.He figures the opposing player will call only ¼ of the time,folding the other ¾ of the time.If the opposing player calls his raise,he figures he will never win.The pot size is 1,000 (including the opposing player's bet).
a.Draw a decision tree for this scenario including the information provided in part b.
b.Suppose that the player is thinking of raising to $400 (he will put in 200 to match the opponent's bet and another 200 as a raise,his opponent would then have to put in 200 more to call the raise).Is this the best option or should he instead call or fold?
c.At what raise size is the player's EMV of a raise equivalent to simply calling?

Accepted Answer

a. @#IMG-DLM& b.EMV of a fold is 0,EMV of a call i

Question 5

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

Accepted Answer

A) 15,000 
B) 17,000 
C) 17,500 
D) 18,500 
E) 20,000 
A) 15,000 
B) 17,000 
C) 17,500 
D) 18,500 
E) 20,000

Question 6

A(n)________ is a tabular means of analyzing decision alternatives and states of nature.

Accepted Answer

The answer of A(n)________ is a tabular means of analyzing...

Question 7

The likelihood that a decision maker will ever receive a payoff precisely equal to the EMV when making any one decision is:

Accepted Answer

A) low (near 0%). 
B) high (near 100%). 
C) dependent upon the number of alternatives. 
D) dependent upon the number of states of nature. 
E) none of the above 
A) low (near 0%). 
B) high (near 100%). 
C) dependent upon the number of alternatives. 
D) dependent upon the number of states of nature. 
E) none of the above

Question 8

Suppose a manufacturing plant is considering three options for expansion.The first one is to expand into a new plant (large),the second to add on third-shift to the daily schedule (medium),and the third to do nothing (small).There are three possibilities for demand.These are high,medium,and low with each having an equal likelihood of occurring.Suppose that the profits for the expansion plans are as follows (respective to high,medium,low demand).The large expansion profits are $100000,$10000,-$10000,the medium expansion choice $40000,$40000,$5000 and the small expansion choice $15000,$15000,$15000.Calculate the EMV of each choice.Which of the expansion plans should the manager choose?

Accepted Answer

EMV large expansion is .33(100000)+ .33(

Question 9

________ is the expected payout or value of a variable that has different possible states of nature,each with an associated probability.

Accepted Answer

Expected m

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

An operations manager's staff has compiled the information below for four manufacturing alternatives (E,F,G,and H)that vary by production technology and the capacity of the machinery.All choices enable the same level of total production and have the same lifetime.The four states of nature represent four levels of consumer acceptance of the firm's products.Values in the table are net present value of future profits in millions of dollars.Forecasts indicate that there is a 0.1 probability of acceptance level 1,0.2 chance of acceptance level 2,0.4 chance of acceptance level 3,and 0.3 change of acceptance level 4.
   Using the criterion of expected monetary value,which production alternative should be chosen?

Accepted Answer

The expected values are:
E = .1(50)+ .2(

Question 12

The last step of the decision-making process is to:

Accepted Answer

A) develop a model. 
B) evaluate each alternative. 
C) select the best alternative. 
D) implement the decision. 
E) check the decision with senior management. 
A) develop a model. 
B) evaluate each alternative. 
C) select the best alternative. 
D) implement the decision. 
E) check the decision with senior management.

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

In the context of decision-making,define a state of nature.

Accepted Answer

A state of nature is an occurr

Question 15

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

Accepted Answer

(1)Maximax is a criterion that finds an

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

Decision trees:

Accepted Answer

A) give more accurate solutions than decision tables. 
B) give less accurate solutions than decision tables. 
C) are especially powerful when a sequence of decisions must be made. 
D) are rarely used because one needs specialized software to graph them. 
E) are too complex to be used by decision makers. 
A) give more accurate solutions than decision tables. 
B) give less accurate solutions than decision tables. 
C) are especially powerful when a sequence of decisions must be made. 
D) are rarely used because one needs specialized software to graph them. 
E) are too complex to be used by decision makers.

Question 18

The construction manager for Acme Construction,Inc.must decide whether to build single family homes,apartments,or condominiums.This is not a product-mix problem,but an all-or-nothing decision.He will hire workers and rent equipment appropriate for one action only.He estimates annual profits (in thousands of dollars)will vary with population trends as follows:
   a.If he uses the maximin criterion,which type of dwellings will he choose to build? Show your supporting calculations.
b.If he uses the equally likely criterion,which kind of dwellings will he choose to build? Show your supporting calculations.
c.If the construction manager were an optimist,what criterion would he choose? What would be the choice of dwelling for that criterion? Show your supporting calculations.

Accepted Answer

(a)The pessimistic maximin criterion ass

Question 19

Describe the meaning of EVPI.

Accepted Answer

EVPI is defined as the expected value of

Question 20

The expected value with perfect information:

Accepted Answer

A) equals EVPI - Maximum EMV. 
B) requires that each decision alternative have a known probability of occurrence. 
C) is an input into the calculation of the expected value of perfect information. 
D) is the average of the maximax and the maximin. 
E) none of the above 
A) equals EVPI - Maximum EMV. 
B) requires that each decision alternative have a known probability of occurrence. 
C) is an input into the calculation of the expected value of perfect information. 
D) is the average of the maximax and the maximin. 
E) none of the above

Exam 22: Decision-Making Tools

The first step,and a key element,in the decision-making process is to:

The following decision tree has how many state of nature nodes?

What is the outcome of an alternative/state of nature combination called?

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

A(n)________ is a tabular means of analyzing decision alternatives and states of nature.

The likelihood that a decision maker will ever receive a payoff precisely equal to the EMV when making any one decision is:

________ is the expected payout or value of a variable that has different possible states of nature,each with an associated probability.

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

The last step of the decision-making process is to:

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

In the context of decision-making,define a state of nature.

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

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

Decision trees:

Describe the meaning of EVPI.

The expected value with perfect information:

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