Question 1

A maximin strategy will always choose the act or alternative that ________.

Accepted Answer

A) maximizes the expected monetary value 
B) minimizes the maximum regret or opportunity loss 
C) maximizes the potential payoff regardless of the state of nature 
D) guarantees a payoff for any state of nature

Question 2

The manager of Paul's fruit and vegetable store is considering the purchase of a new seedless watermelon from a wholesale distributor. Because this seedless watermelon costs $4,will sell for $7,and is highly perishable,he expects only to sell between six and nine of them. What is the payoff value for the purchase of seven watermelons when the demand is for seven or more watermelons?

Accepted Answer

A) 18 
B) 21 
C) 24 
D) 42

Question 3

Sensitivity analysis examines the effects that changes in the probabilities for the states of nature have on the expected values of the alternatives or acts,and the corresponding decisions.

Accepted Answer

A) True 
 B)False

Question 4

Applying probabilities to a payoff table results in ________.

Accepted Answer

A) expected opportunity loss for each alternative or act 
B) expected monetary value for each alternative or act 
C) value of perfect information 
D) a decision tree

Question 5

The manager of Paul's fruit and vegetable store is considering the purchase of a new seedless watermelon from a wholesale distributor. Because this seedless watermelon costs $4,will sell for $7,and is highly perishable,he expects only to sell between six and nine of them. What is the payoff value for the purchase of eight watermelons when the demand is for seven watermelons?

Accepted Answer

A) 10 
B) 17 
C) 24 
D) 21

Question 6

Maximizers advocate a maximin strategy.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is not a component of the decision-making process?

Accepted Answer

A) Alternatives 
B) Payoff 
C) States of nature 
D) Seasonal indexes

Question 8

When the payoffs are profits,the maximin strategy selects the alternative or act with the maximum gain.

Accepted Answer

A) True 
 B)False

Question 9

Besides a payoff table,the information for decision analysis can be organized using a ________.

Accepted Answer

A) decision tree 
B) scatter diagram 
C) fishbone diagram 
D) Pareto chart

Question 10

The manager of Paul's fruit and vegetable store is considering the purchase of a new seedless watermelon from a wholesale distributor. Because this seedless watermelon costs $4,will sell for $7,and is highly perishable,he expects only to sell between six and nine of them. What is the opportunity loss for purchasing eight watermelons when the demand is for nine watermelons?

Accepted Answer

A) 0 
B) 3 
C) 4 
D) 6

Question 11

The manager of Paul's fruit and vegetable store is considering the purchase of a new seedless watermelon from a wholesale distributor. Because this seedless watermelon costs $4,will sell for $7,and is highly perishable,he expects only to sell between six and nine of them. What is the payoff value for the purchase of eight watermelons when the demand is for eight or more watermelons?

Accepted Answer

A) 17 
B) 21 
C) 24 
D) 10

Question 12

The national sales manager for "I colored this" (ICT)T-shirts provides all salespersons with the payoff table shown next,giving the estimated profit when a retailer purchases from one to four dozen T-shirts. The probability of demand for each state of nature is also shown.   What is the expected payoff for purchasing four dozen T-shirts?

Accepted Answer

A) 72 
B) 120 
C) 168 
D) 192

Question 13

In decision making,if there are one or more unknown factors,then the decision is made under conditions of uncertainty.

Accepted Answer

A) True 
 B)False

Question 14

A person is trying to decide if he or she should buy a lottery ticket. The ticket costs $2.00. If the ticket is a winner,the prize would be $1,000. Knowing that winning $1,000 is not a certain outcome (state of nature),the person finds that the probability of winning is 0.001. Based on this information,the following payoff table can be constructed:  What is the probability of losing $2.00?

Accepted Answer

A) 0.001 
B) 0.999 
C) 1.00 
D) Cannot be computed

Question 15

The national sales manager for "I colored this" (ICT)T-shirts provides all salespersons with the following opportunity loss table showing the potential lost profit for each purchase decision or act from one to four dozen T-shirts. The probability of demand for each state of nature is also shown.   What is the expected opportunity loss of purchasing one dozen T-shirts?

Accepted Answer

A) 84 
B) 108 
C) 156 
D) 204

Question 16

The national sales manager for "I colored this" (ICT)T-shirts provides all salespersons with the payoff table shown next,giving the estimated profit when a retailer purchases from one to four dozen T-shirts. The probability of demand for each state of nature is also shown.   What would be the best decision if the maximax strategy is used?

Accepted Answer

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

Question 17

Optimists advocate a maximax strategy.

Accepted Answer

A) True 
 B)False

Question 18

The national sales manager for "I colored this" (ICT)T-shirts provides all salespersons with the payoff table shown next,giving the estimated profit when a retailer purchases from one to four dozen T-shirts. The probability of demand for each state of nature is also shown.   What is the value of perfect information if the expected payoff is $180?

Accepted Answer

A) 0 
B) 96 
C) 120 
D) 150

Question 19

A decision maker's course of action results in a consequence or payoff.

Accepted Answer

A) True 
 B)False

Question 20

A decision maker usually has a choice among several possible alternative acts. For each alternative act,there are many possible results called states of occurrence.

Accepted Answer

A) True 
 B)False

Exam 20: An Introduction to Decision Theory

A maximin strategy will always choose the act or alternative that ________.

Sensitivity analysis examines the effects that changes in the probabilities for the states of nature have on the expected values of the alternatives or acts,and the corresponding decisions.

Applying probabilities to a payoff table results in ________.

Maximizers advocate a maximin strategy.

Which of the following is not a component of the decision-making process?

When the payoffs are profits,the maximin strategy selects the alternative or act with the maximum gain.

Besides a payoff table,the information for decision analysis can be organized using a ________.

In decision making,if there are one or more unknown factors,then the decision is made under conditions of uncertainty.

Optimists advocate a maximax strategy.

A decision maker's course of action results in a consequence or payoff.

A decision maker usually has a choice among several possible alternative acts. For each alternative act,there are many possible results called states of occurrence.