Question 1

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 six watermelons?

Accepted Answer

A) 14 
B) 18 
C) 21 
D) 24

Question 2

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.   How many dozen ICT T-shirts should be purchased to yield the highest potential payoff?

Accepted Answer

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

Question 3

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 maximum payoff under conditions of certainty?

Accepted Answer

A) 120 
B) 240 
C) 360 
D) 480

Question 4

What is the most optimistic of all possible maximin,maximax,and minimax regret strategies?

Accepted Answer

A) Minimax 
B) Maximax 
C) Maximin 
D) Minimax regret

Question 5

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 two dozen T-shirts?

Accepted Answer

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

Question 6

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 decision that uses a maximin approach?

Accepted Answer

A) Buy 
B) Don't buy 
C) Lose 
D) Win

Question 7

Of the three components in any decision-making situation,which of the following cannot be controlled?

Accepted Answer

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

Exam 20: An Introduction to Decision Theory

What is the most optimistic of all possible maximin,maximax,and minimax regret strategies?

Of the three components in any decision-making situation,which of the following cannot be controlled?