Question 1

Construct a decision tree to identify the buyer's course of action that maximizes the expected profit earned by the chain from the purchase and subsequent sale of footballs in the coming year.

Accepted Answer

The answer of Construct a decision tree to identify the...

Question 2

Which of the following statements are true?

Accepted Answer

A) Sensitivity analysis is a process of seeing how optimal decision and EMV vary when one or more inputs vary. 
B) Multistage decision problem is one where decisions and observations of uncertain outcomes alternate. 
C) Contingency plan is a strategy in a multistage decision problem that specifies which decision to make for each possible outcome. 
D) All of these choices are true.

Question 3

Prior probabilities are sometimes called likelihoods,the probabilities that are influenced by information about the outcome of an earlier uncertainty.

Accepted Answer

A) True 
 B)False

Question 4

In the nomenclature of Bayes' Rule,which of the following are probabilities that are conditioned on information that is obtained?

Accepted Answer

A) Prior probabilities 
B) Posterior probabilities 
C) Marginal probabilities 
D) Objective probabilities

Question 5

Should the credit union purchase the report if it costs $150?

Accepted Answer

The answer of Should the credit union purchase the report...

Question 6

What is Bayes' Rule?

Accepted Answer

A) Bayes' Rule is a rule that provides a mathematical way of updating probabilities as new information becomes available. 
B) Bayes' Rule is a rule that provides a mathematical way of calculating EMV. 
C) Bayes' Rule is a rule that provides a mathematical way of calculating EVI. 
D) None of these choices are correct.

Question 7

The expected value of sample information (EVSI)is equal to

Accepted Answer

A) EMV with posterior information - EMV with prior information. 
B) EMV with free perfect information - EMV free information. 
C) EMV with perfect information - EMV without information. 
D) EMV with free information - EMV without information.

Question 8

In decision trees,probabilities are listed on probability branches.These probabilities are _____ events that have already been observed.

Accepted Answer

A) marginal due to 
B) conditional on 
C) averaged with 
D) increased by

Question 9

In making decisions,we choose the decision with the largest expected monetary value at each node.

Accepted Answer

A) True 
 B)False

Question 10

Show that this decision maker is indifferent between gaining nothing and entering a risky situation with a gain of $80,000 (probability 1/3)and a loss of $10,000 (probability 2/3).

Accepted Answer

The answer of Show that this decision maker is indifferent...

Question 11

In decision trees,monetary values _____ the end nodes.

Accepted Answer

A) are shown in 
B) are shown to the right of 
C) appear above 
D) are shown to the left of

Question 12

A risk profile from PrecisionTree lists

Accepted Answer

A) the full probability distribution. 
B) all possible outcomes and their corresponding utility. 
C) all options and their possible outcomes. 
D) the nodes and branches for each possible outcome.

Question 13

Exponential utility has an adjustable parameter called risk tolerance.The risk tolerance parameter measures

Accepted Answer

A) how much money the decision maker has to spend. 
B) the decision maker's attitude toward risk. 
C) how much risk there is in a given decision. 
D) the probability of an unfavorable outcome.

Question 14

Generate a risk profile for each possible decision in this problem.Would this have any impact on your decision?

Accepted Answer

The answer of Generate a risk profile for each possible...

Question 15

In a single-stage decision problem,a single decision is made first,and then all uncertainty is resolved.

Accepted Answer

A) True 
 B)False

Question 16

The bank can thoroughly investigate the customer's credit record and obtain a favorable or unfavorable recommendation.If the credit report is perfectly reliable,what is the most the credit union should be willing to pay for the report?

Accepted Answer

The answer of The bank can thoroughly investigate the customer's...

Question 17

The expected value of perfect information (EVPI)is the most the decision maker would be willing to pay for the sample information.

Accepted Answer

A) True 
 B)False

Question 18

Construct a decision tree to help Southport identify the strategy that maximizes its expected profit for this investment.Make sure to label all decision and chance nodes and include appropriate costs,payoffs and probabilities.

Accepted Answer

The answer of Construct a decision tree to help Southport...

Question 19

EMV criteria guarantee good outcomes.

Accepted Answer

A) True 
 B)False

Question 20

Mathematically,the utility function for risk adverse individuals is said to be _____ and/or _____.

Accepted Answer

A) decreasing,linear 
B) decreasing,convex 
C) increasing,linear 
D) increasing,concave

Exam 6: Decision Making Under Uncertainty

Construct a decision tree to identify the buyer's course of action that maximizes the expected profit earned by the chain from the purchase and subsequent sale of footballs in the coming year.

Which of the following statements are true?

Prior probabilities are sometimes called likelihoods,the probabilities that are influenced by information about the outcome of an earlier uncertainty.

In the nomenclature of Bayes' Rule,which of the following are probabilities that are conditioned on information that is obtained?

Should the credit union purchase the report if it costs $150?

What is Bayes' Rule?

The expected value of sample information (EVSI) is equal to

In decision trees,probabilities are listed on probability branches.These probabilities are _____ events that have already been observed.

In making decisions,we choose the decision with the largest expected monetary value at each node.

Show that this decision maker is indifferent between gaining nothing and entering a risky situation with a gain of $80,000 (probability 1/3)and a loss of $10,000 (probability 2/3).

In decision trees,monetary values _____ the end nodes.

A risk profile from PrecisionTree lists

Exponential utility has an adjustable parameter called risk tolerance.The risk tolerance parameter measures

Generate a risk profile for each possible decision in this problem.Would this have any impact on your decision?

In a single-stage decision problem,a single decision is made first,and then all uncertainty is resolved.

The bank can thoroughly investigate the customer's credit record and obtain a favorable or unfavorable recommendation.If the credit report is perfectly reliable,what is the most the credit union should be willing to pay for the report?

The expected value of perfect information (EVPI)is the most the decision maker would be willing to pay for the sample information.

Construct a decision tree to help Southport identify the strategy that maximizes its expected profit for this investment.Make sure to label all decision and chance nodes and include appropriate costs,payoffs and probabilities.

EMV criteria guarantee good outcomes.

Mathematically,the utility function for risk adverse individuals is said to be _ and/or _.