Question 1

A decision maker has developed the following decision tree.How sensitive is the choice between N and P to the probabilities of states of nature U and V?

Accepted Answer

Choose N if p ≤ .78.

Question 2

Transrail is bidding on a project that it figures will cost $400,000 to perform.Using a 25% markup,it will charge $500,000,netting a profit of $100,000.However,it has been learned that another company,Rail Freight,is also considering bidding on the project.If Rail Freight does submit a bid,it figures to be a bid of about $470,000.Transrail really wants this project and is considering a bid with only a 15% markup to $460,000 to ensure winning regardless of whether or not Rail Freight submits a bid.
a.Prepare a profit payoff table from Transrail's point of view.
b.What decision would be made if Transrail were conservative?
c.If Rail Freight is known to submit bids on only 25% of the projects it considers,what decision should Transrail make?
d.Given the information in (c),how much would a corporate spy be worth to Transrail to find out if Rail Freight will bid?

Accepted Answer

​
 a.
  
b. $\operatorname { Bid } \$ 460,000$
c. Bid $\$ 500,000$
d. $\$ 15,000$

Question 3

​The approach to determining the optimal decision strategy involves

Accepted Answer

A) ​a forward (left to right)pass through the decision tree. 
B) ​a backward (right to left)pass through the decision tree. 
C) ​choosing the outcome of a chance event with the greatest probability. 
D) ​choosing the outcome of a chance event with the greatest payoff. 
A) ​a forward (left to right)pass through the decision tree. 
B) ​a backward (right to left)pass through the decision tree. 
C) ​choosing the outcome of a chance event with the greatest probability. 
D) ​choosing the outcome of a chance event with the greatest payoff. B

Question 4

East West Distributing is in the process of trying to determine where they should schedule next year's production of a popular line of kitchen utensils that they distribute.Manufacturers in four different countries have submitted bids to East West.However,a pending trade bill in Congress will greatly affect the cost to East West due to proposed tariffs,favorable trading status,etc.
After careful analysis,East West has determined the following cost breakdown for the four manufacturers (in $1,000's)based on whether or not the trade bill passes:
​
   
a.If East West estimates that there is a 40% chance of the bill passing,which country should they choose for manufacturing?
b.Over what range of values for the "bill passing" will the solution in part (a)remain optimal?

Accepted Answer

​
 a. Using EV approach: @#LAT-DLM&; Cho

Question 5

Dollar Department Stores has just acquired the chain of Wenthrope and Sons Custom Jewelers.Dollar has received an offer from Harris Diamonds to purchase the Wenthrope store on Grove Street for $120,000.Dollar has determined probability estimates of the store's future profitability,based on economic outcomes,as: P($80,000)= .2,P($100,000)= .3,P($120,000)= .1,and P($140,000)= .4.
a.Should Dollar sell the store on Grove Street?
b.What is the EVPI?
c.Dollar can have an economic forecast performed,costing $10,000,that produces indicators I1 and I2,for which P(I1 | 80,000)= .1;P(I1 | 100,000)= .2;P(I1 | 120,000)= .6;P(I1 | 140,000)= .3.Should Dollar purchase the forecast?

Accepted Answer

a. Yes, Dollar shoul

Question 6

The expected value of sample information can never be less than the expected value of perfect information.

Accepted Answer

A) True 
 B)False

Question 7

Why perform sensitivity analysis? Of what use is sensitivity analysis where good probability estimates are difficult to obtain?

Accepted Answer

Sensitivity analysis is a crucial techni

Question 8

Fold back this decision tree.Clearly state the decision strategy you determine.
​

Accepted Answer

​
 @#IMG-DLM& 
​
Cho

Question 9

The options from which a decision maker chooses a course of action are

Accepted Answer

A) called the decision alternatives. 
B) under the control of the decision maker. 
C) not the same as the states of nature. 
D) All of the alternatives are true. 
A) called the decision alternatives. 
B) under the control of the decision maker. 
C) not the same as the states of nature. 
D) All of the alternatives are true.

Question 10

A sequence of decisions and chance outcomes that provide the optimal solution to a decision problem is called​

Accepted Answer

A) ​a payoff table 
B) ​the expected value approach 
C) ​a decision strategy 
D) ​a contingency plan 
A) ​a payoff table 
B) ​the expected value approach 
C) ​a decision strategy 
D) ​a contingency plan

Question 11

When working backward through a decision tree,the analyst should​

Accepted Answer

A) ​compute the expected value at each chance node 
B) ​select the best chance branch at each chance node 
C) ​select the best chance branch at each decision node 
D) ​compute the expected value at each decision node 
A) ​compute the expected value at each chance node 
B) ​select the best chance branch at each chance node 
C) ​select the best chance branch at each decision node 
D) ​compute the expected value at each decision node

Question 12

​A decision tree provides

Accepted Answer

A) ​a heuristic method for analyzing decisions. 
B) ​a deterministic approach to decision analysis. 
C) ​the absolute value of the decision. 
D) ​an objective way of determining the relative value of each decision alternative. 
A) ​a heuristic method for analyzing decisions. 
B) ​a deterministic approach to decision analysis. 
C) ​the absolute value of the decision. 
D) ​an objective way of determining the relative value of each decision alternative.

Question 13

EVPI equals the expected regret associated with the minimax decision.

Accepted Answer

A) True 
 B)False

Question 14

If p is the probability of Event 1 and (1 − p)is the probability of Event 2,for what values of p would you choose A? B? C? Values in the table are payoffs.
 $$\begin{array} { c c c } 
\text { Choice/Event } & \text { Event 1 } & \text { Event 2 } \
\hline \text { A } & 0 & 20 \
\text { B } & 4 & 16 \
\text { C } & 8 & 0
\end{array}$$

Accepted Answer

Choose A if p ≤ .5,c

Question 15

Fold back the decision tree and state what strategy should be followed.
​

Accepted Answer

​
 @#IMG-DLM& 
​
Strategy: Sel

Question 16

States of nature should be defined so that one and only one will actually occur.

Accepted Answer

A) True 
 B)False

Question 17

Sample information with an efficiency rating of 100% is perfect information.

Accepted Answer

A) True 
 B)False

Question 18

For a minimization problem,the conservative approach is often referred to as the

Accepted Answer

A) minimax approach 
B) maximin approach 
C) maximax approach 
D) minimin approach 
A) minimax approach 
B) maximin approach 
C) maximax approach 
D) minimin approach

Question 19

A posterior probability associated with sample information is of the form​

Accepted Answer

Question 20

For a maximization problem,the conservative approach is often referred to as the

Accepted Answer

A) minimax approach. 
B) maximin approach. 
C) maximax approach. 
D) minimin approach. 
A) minimax approach. 
B) maximin approach. 
C) maximax approach. 
D) minimin approach.

A decision maker has developed the following decision tree.How sensitive is the choice between N and P to the probabilities of states of nature U and V?

The approach to determining the optimal decision strategy involves

The expected value of sample information can never be less than the expected value of perfect information.

Why perform sensitivity analysis? Of what use is sensitivity analysis where good probability estimates are difficult to obtain?

Fold back this decision tree.Clearly state the decision strategy you determine.

The options from which a decision maker chooses a course of action are

A sequence of decisions and chance outcomes that provide the optimal solution to a decision problem is called

When working backward through a decision tree,the analyst should

A decision tree provides

EVPI equals the expected regret associated with the minimax decision.

If p is the probability of Event 1 and (1 − p)is the probability of Event 2,for what values of p would you choose A? B? C? Values in the table are payoffs. Choice/Event Event 1 Event 2 A 0 20 B 4 16 C 8 0

Fold back the decision tree and state what strategy should be followed.

States of nature should be defined so that one and only one will actually occur.

Sample information with an efficiency rating of 100% is perfect information.

For a minimization problem,the conservative approach is often referred to as the

A posterior probability associated with sample information is of the form

For a maximization problem,the conservative approach is often referred to as the

Introduction

Introduction to Probability

Probability Distributions

Utility Game Theory

Time Series Analysis Forecasting

Intro to Linear Programming

LP Sensitivity Analysis

LP Applications

Distribution Network Models

Integer Linear Programming

Advanced Optimization Applications

Project Scheduling

Inventory Models

Waiting Line Models

Simulation

Markov Processes

Filters

Exam 4: Decision Analysis

A decision maker has developed the following decision tree.How sensitive is the choice between N and P to the probabilities of states of nature U and V?

​The approach to determining the optimal decision strategy involves

The expected value of sample information can never be less than the expected value of perfect information.

Why perform sensitivity analysis? Of what use is sensitivity analysis where good probability estimates are difficult to obtain?

Fold back this decision tree.Clearly state the decision strategy you determine. ​

The options from which a decision maker chooses a course of action are

A sequence of decisions and chance outcomes that provide the optimal solution to a decision problem is called​

When working backward through a decision tree,the analyst should​

​A decision tree provides

EVPI equals the expected regret associated with the minimax decision.

If p is the probability of Event 1 and (1 − p)is the probability of Event 2,for what values of p would you choose A? B? C? Values in the table are payoffs. Choice/Event Event 1 Event 2 A 0 20 B 4 16 C 8 0

Fold back the decision tree and state what strategy should be followed. ​

States of nature should be defined so that one and only one will actually occur.

Sample information with an efficiency rating of 100% is perfect information.

For a minimization problem,the conservative approach is often referred to as the

A posterior probability associated with sample information is of the form​

For a maximization problem,the conservative approach is often referred to as the

Introduction

Introduction to Probability

Probability Distributions

Utility Game Theory

Time Series Analysis Forecasting

Intro to Linear Programming

LP Sensitivity Analysis

LP Applications

Distribution Network Models

Integer Linear Programming

Advanced Optimization Applications

Project Scheduling

Inventory Models

Waiting Line Models

Simulation

Markov Processes

Filters

The approach to determining the optimal decision strategy involves

Fold back this decision tree.Clearly state the decision strategy you determine.

A sequence of decisions and chance outcomes that provide the optimal solution to a decision problem is called

When working backward through a decision tree,the analyst should

A decision tree provides

Fold back the decision tree and state what strategy should be followed.

A posterior probability associated with sample information is of the form