Exam 15: Decisions Under Risk and Uncertainty

Refer to the following table showing the probability distribution of payoffs from an activity to answer the question below: What is the variance of the distribution?

A firm is considering two projects,A and B,with the following probability distributions for profit. Given the above,what is the expected value of project B in $1,000s)?

A firm is considering two projects,A and B,with the following probability distributions for profit. Given the above,the expected value of project A in $1,000s)is

A firm is considering the decision of investing in new plants.The following is the profit payoff matrix under three conditions: it does not expand,it builds two new plants,or it builds one new plant.Three possible states of nature can exist--no change in the economy,the economy contracts and the economy grows.The firm has no idea of the probability of each state. What decision would be made using the minimax regret rule?

A firm is considering two projects,A and B,with the following probability distributions for profit. Given the above,a decision maker using the coefficient of variation rule would

Refer to the following probability distribution for profit to answer the question below: What is the expected profit for this distribution?

Refer to the following probability distribution for profit to answer the question below: What is the coefficient of variation for this distribution?

The following table shows the expected value and variance for 5 projects a firm can undertake. Which of the following is are)correct?

The manager's utility function for profit is U $\pi$ )= 10 ln $\pi$ ),where $\pi$ is the dollar amount of profit.The manager is considering a risky decision with the four possible profit outcomes shown below.The manager makes the following subjective assessments about the probability of each profit outcome: What is the expected utility of profit?

A firm is considering the decision of investing in new plants.It can choose no new plants,one new plant,or two new plants.The following table gives the profits for each choice under three states of the economy.The manager assigns the following probabilities to each state of the economy: the economy expands,20%,the economy contracts,40%,or the economy is unchanged 40%. Using the mean variance rules,which decision is correct?

The manager's utility function for profit is U $\pi$ )= 10 ln $\pi$ ),where $\pi$ is the dollar amount of profit.The manager is considering a risky decision with the four possible profit outcomes shown below.The manager makes the following subjective assessments about the probability of each profit outcome: What is the expected profit?

Refer to the following table showing the probability distribution of payoffs from an activity to answer the question below: What is the expected value?

A firm making production plans believes there is a 30% probability the price will be $10,a 50% probability the price will be $15,and a 20% probability the price will be $20.The manager must decide whether to produce 6,000 units of output A),8,000 units B)or 10,000 units C).The following table shows 9 possible outcomes depending on the output chosen and the actual price. If the mean-variance rule is used,how much should the firm produce?

A firm is considering two projects,A and B,with the following probability distributions for profit. Given the above,the coefficient of variation to 2 decimal places)is

The following payoff matrix shows the profit outcomes for three projects,A,B,and C,for each of two possible product prices.There is a 60% probability the price will be $10 and a 40% probability the price will be $20. Using the mean variance rule a decision maker would choose

The following payoff matrix shows the various profit outcomes for 3 projects,A,B,and C,under 2 possible states of nature: the product price is $10 or the product price is $20. Using the minimax regret rule the decision maker would choose

Use the following two probability distributions for sales of a firm to answer the following question: The expect value of sales for Distribution 2 is _____________.

The following payoff matrix shows the profit outcomes for three projects,A,B,and C,for each of two possible product prices.There is a 60% probability the price will be $10 and a 40% probability the price will be $20. Using the maximum expected value rule a decision maker would choose

The following payoff matrix shows the various profit outcomes for 3 projects,A,B,and C,under 2 possible states of nature: the product price is $10 or the product price is $20. Using the equal probability rule the decision maker would choose

The following table shows the expected value and variance for 5 projects a firm can undertake. Which of the following is are)correct if the mean-variance rule is used for the decision?