Question 1

The uncontrollable future events that can affect the outcome of a decision are known as _____.

Accepted Answer

A)   alternatives
B)   decision outcomes
C)   payoffs
D)   states of nature D

Question 2

Application of Bayes' theorem enables us to compute the _____.

Accepted Answer

A)   prior probability of each state of nature
B)   posterior probability of each sample outcome
C)   conditional probability of the sample outcomes given each state of nature
D)   conditional probability of the states of nature given each sample outcome D

Question 3

The difference between the expected value of an optimal strategy based on sample information and the "best" expected value without any sample information is called the _____ information.

Accepted Answer

A)   optima
B)   expected value of sample
C)   expected value of perfect
D)   efficiency of B

Question 4

Future events that cannot be controlled by the decision maker are called _____.

Accepted Answer

A)   indicators
B)   states of nature
C)   prior probabilities
D)   posterior probabilities

Question 5

A posterior probability associated with sample information is of the form _____.

Accepted Answer

A)   P(a state of nature | a sample outcome) 
B)   P(a sample outcome | a state of nature) 
C)   P(a decision alternative | a sample outcome) 
D)   P(a sample outcome | a decision alternative)

Question 6

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

Question 7

The approach to determine 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

Question 8

Nodes indicating points where an uncertain event will occur are known as _____ nodes.

Accepted Answer

A)   decision
B)   chance
C)   marginal
D)   conditional

Question 9

The probability of one event given the known outcome of a (possibly) related event is known as _____ probability.

Accepted Answer

A)   unconditional
B)   joint
C)   marginal
D)   conditional

Question 10

For a decision alternative, the weighted average of the payoffs is known as _____.

Accepted Answer

A)   the expected value of perfect information
B)   the expected value
C)   the expected probability
D)   perfect information

Question 11

A line or arc connecting the nodes of a decision tree is called a(n) _____.

Accepted Answer

A)   junction
B)   intersection
C)   branch
D)   node

Question 12

In computing an expected value (EV), the weights are _____.

Accepted Answer

A)   decision alternative probabilities
B)   in pounds or some unit of weight
C)   in dollars or some unit of currency
D)   the state-of-nature probabilities

Question 13

A decision criterion that weights the payoff for each decision by its probability of occurrence is known as the _____.

Accepted Answer

A)   payoff criterion
B)   expected value criterion
C)   probability
D)   expected value of perfect information

Question 14

A tabular representation of the payoffs for a decision problem is a _____.

Accepted Answer

A)   decision tree
B)   payoff table
C)   matrix
D)   sequential matrix

Question 15

The probability of the states of nature, after use of Bayes' theorem to adjust the prior probabilities based on given indicator information, is called _____.

Accepted Answer

A)   marginal probability
B)   conditional probability
C)   posterior probability
D)   None of the answers is correct.

Question 16

The expected value of information that would tell the decision maker exactly which state of nature is going to occur is the _____.

Accepted Answer

A)   expected value of sample information
B)   expected value of perfect information
C)   maximum information
D)   expected value

Question 17

The expected opportunity loss of the best decision alternative is the _____.

Accepted Answer

A)   expected value
B)   payoff
C)   expected value of perfect information
D)   None of the answers is correct.

Question 18

Prior probabilities are the probabilities of the states of nature _____.

Accepted Answer

A)   after obtaining sample information
B)   prior to obtaining perfect information
C)   prior to obtaining sample information
D)   after obtaining perfect information

Question 19

New information obtained through research or experimentation that enables an updating or revision of the state-of-nature probabilities is _____.

Accepted Answer

A)   population information
B)   sampling without replacement
C)   sample information
D)   conditional information

Question 20

The probabilities for the states of nature must be _____.

Accepted Answer

A)   between 0 and 1 and they must add to 1
B)   a series of zeros and ones
C)   greater than 1 and must sum to 100 or less
D)   derived using the classical method of assigning probabilities

Exam 20: Decision Analysis