Question 1

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 
E) increasing ,decreasing

Question 2

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 3

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 4

In general,the expected monetary values (EMV)represent possible payoffs.

Accepted Answer

A) True 
 B)False

Question 5

What is the optimal strategy for order quantity,and what is the expected profit in that case?

Accepted Answer

The answer of What is the optimal strategy for order...

Question 6

If all monetary values in a decision problem are costs,then it is customary to list them as __________ values in a cost table.

Accepted Answer

A) positive 
B) negative 
C) either positive or negative 
D) All of these options

Question 7

Construct a decision tree to help the station identify its optimal format.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 the...

Question 8

Construct a decision tree to help the television network identify the strategy that maximizes its expected profit in responding to a newly proposed television program.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 the...

Question 9

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 10

The slope of the lines for the input variables on a tornado chart indicates their relative impact on the expected value

Accepted Answer

A) True 
 B)False

Question 11

Suppose that Southport could consider another alternative - postponing the go/no-go decision on the new venture and drilling for a core sample of the ore to determine with complete certainty its metallurgical property.How much should Southport be willing to pay for the core sample?

Accepted Answer

The answer of Suppose that Southport could consider another alternative...

Question 12

A strategy region chart is useful for seeing whether the decision changes over the range of the input variable.

Accepted Answer

A) True 
 B)False

Question 13

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 
E) None of these options

Question 14

A spider chart shows both the range (as a percentage)of the variability of the input variables as well as the resulting changes in the expected value

Accepted Answer

A) True 
 B)False

Question 15

As the average monthly revenue associated with the rock format and an A1 audience varies between $85,000 to about $140,000,what happens to the maximum expected revenue? Briefly explain why.

Accepted Answer

The answer of As the average monthly revenue associated with...

Question 16

What impact,if any,does the probability of being in an accident have on her decision? Briefly explain your answer

Accepted Answer

The answer of What impact,if any,does the probability of being...

Question 17

Tyson Manufacturing (a maker of industrial products)is interested in marketing a new product.The company must decide whether to manufacture this product essentially on its own or employ a subcontractor to manufacture it.Below are two tables that represent the information related to the estimated probability distribution of the cost of one unit of this product under each alternative.
  Assuming that Tyson seeks to minimize the expected unit cost of manufacturing of buying the new product,should the company make the new product or buy it from a subcontractor? Show your work.

Accepted Answer

The answer of Tyson Manufacturing (a maker of industrial products)is...

Question 18

Generate a statistical summary and risk profile for each of Mrs.Rich's possible decisions.Does this information impact her decision?

Accepted Answer

The answer of Generate a statistical summary and risk profile...

Question 19

The solution procedure that was introduced in the book for decision trees is called the:

Accepted Answer

A) folding diagram 
B) single-stage method 
C) risk profile method 
D) precision tree method 
E) folding back on the tree

Question 20

Why is there a kink in the line for the "Buy Insurance" line in the above strategy region chart?

Accepted Answer

The answer of Why is there a kink in the...

Exam 6: Decision Making Under Uncertainty

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

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.

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 general,the expected monetary values (EMV)represent possible payoffs.

What is the optimal strategy for order quantity,and what is the expected profit in that case?

If all monetary values in a decision problem are costs,then it is customary to list them as __________ values in a cost table.

Construct a decision tree to help the station identify its optimal format.Make sure to label all decision and chance nodes and include appropriate costs,payoffs and probabilities.

Construct a decision tree to help the television network identify the strategy that maximizes its expected profit in responding to a newly proposed television program.Make sure to label all decision and chance nodes and include appropriate costs,payoffs and probabilities.

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

The slope of the lines for the input variables on a tornado chart indicates their relative impact on the expected value

Suppose that Southport could consider another alternative - postponing the go/no-go decision on the new venture and drilling for a core sample of the ore to determine with complete certainty its metallurgical property.How much should Southport be willing to pay for the core sample?

A strategy region chart is useful for seeing whether the decision changes over the range of the input variable.

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

A spider chart shows both the range (as a percentage)of the variability of the input variables as well as the resulting changes in the expected value

As the average monthly revenue associated with the rock format and an A1 audience varies between $85,000 to about $140,000,what happens to the maximum expected revenue? Briefly explain why.

What impact,if any,does the probability of being in an accident have on her decision? Briefly explain your answer

Generate a statistical summary and risk profile for each of Mrs.Rich's possible decisions.Does this information impact her decision?

The solution procedure that was introduced in the book for decision trees is called the:

Why is there a kink in the line for the "Buy Insurance" line in the above strategy region chart?