C If states of nature are equally likely and an expected value criterion of maximization is used, which alternative would be chosen?.?. The expected monetary value approach is most appro
Trang 28 Among decision environments, uncertainty implies that states of nature have wide ranging
probabilities associated with them
Trang 318 Graphical sensitivity analysis is limited to cases with no more than two alternatives
21 The term sub-optimization is best described as the:
A result of individual departments making the best decisions for their own areas
B limitations on decision-making caused by costs and time
C result of failure to adhere to the steps in the decision process
D result of ignoring symptoms of the problem
E none of the above
22 Which phrase best describes the term bounded rationality?
A thinking a problem through clearly before acting
B taking care not to exhaust limited resources
C the result of departmentalized decision making
D limits imposed on decision making by costs, time, and technology
E the use of extremely structured steps in the decision making process
Trang 424 Sensitivity analysis is required because _
A payoffs and probabilities are estimates
B most decision will affect employees
C expected payoffs are sensitive to the time value of money
D it's the second step in the decision model
E with the passage of time, small decisions get bigger
26 Which of the following characterizes decision-making under uncertainty?
A Decision-makers must rely on probabilities in assessing outcomes
B The likelihood of possible future events is unknown
C Relevant parameters have known values
D Certain parameters have probabilistic outcomes
E none of the above
Trang 529 Determining the average payoff for each alternative and choosing the alternative with the highest average is the approach called:
30 The maximin approach to decision-making refers to:
A minimizing the maximum return
B maximizing the minimum return
C maximizing the minimum expected value
D choosing the alternative with the highest payoff
E choosing the alternative with the minimum payoff
D all of the above
E none of the above
Trang 6
34 A decision tree is:
A an algebraic representation of alternatives
B a behavioral representation of alternatives
C a matrix representation of alternatives
D a schematic representation of alternatives
E limited to a maximum of 12 branches
35 The difference between expected payoff under certainty and expected payoff under risk is the expected:
A monetary value
B value of perfect information
C net present value
D rate of return
E profit
36 If the minimum expected regret is computed, it indicates to a decision-maker the expected:
A value of perfect information
B payoff under certainty
C monetary value
D payoff under risk
E none of the above
Trang 738 A manager has developed the following payoff table that indicates the profits associated with a set of alternatives under two possible states of nature
Answer the following questions:
(A) If the manager uses maximin as the decision criterion, which of the alternatives would be
indicated?
(B) If the manager uses minimax regret as the criterion, which alternative would be indicated?
(C) Determine the expected value of perfect information if P(S2) = 40
(D) Determine the range of P(S2) for which each alternative would be optimal
(B) If maximin were used, which alternative would be chosen?
(C) If states of nature are equally likely and an expected value criterion of maximization is used, which alternative would be chosen?
Trang 8
40 A manager has learned that annual profits from four alternatives being considered for solving a capacity problem are projected to be $15,000 for A, $30,000 for B, $45,000 for C, and $60,000 for D if state of nature 1 occurs; and $60,000 for A, $80,000 for B, $90,000 for C, and $35,000 for D if state
of nature 2 occurs
(A) Assuming maximax is used, what alternative would be chosen?
(B) Assuming maximin is used, what alternative would be chosen?
(C) If P(State of Nature 1) is 40, what alternative has the highest expected monetary value?
(D) Determine the range of P(S2) for which each alternative would be optimal
If condition I materializes, A will cost $12,000, B will cost $20,000, and C will cost $16,000 If
condition II materializes, the costs will be $15,000 for A, $18,000 for B, and $14,000 for C If condition III materializes, the costs will be $10,000 for A, $15,000 for B, and $19,000 for C
(A) Draw a decision tree for this problem
(B) Using expected monetary value, which alternative should be chosen?
Trang 943 The maximin strategy would be:
Trang 1047 The maximin strategy would be:
Trang 1151 The maximin strategy would be:
D either one or two
E either two or three
Trang 12
55 If she uses the Laplace criterion, how many beauticians will she decide to hire?
A one
B two
C three
D either one or two
E either two or three
D either one or two
E either two or three
Trang 13
59 If he uses the maximin criterion, which size bus will he decide to purchase?
A small
B Medium
C large
D either small or Medium
E either medium or large
D either small or Medium
E either medium or large
D either small or Medium
E either medium or large
Trang 14The operations manager for a well-drilling company must recommend whether to build a new facility, expand his existing one, or do nothing He estimates that long-run profits (in $000) will vary with the amount of precipitation (rainfall) as follows:
D either do nothing or expand
E either expand or build new
D either do nothing or expand
E either expand or build new
D either do nothing or expand
E either expand or build new
67 If he feels the chances of low, normal, and high precipitation are 30%, 20%, and 50%
respectively, what are expected long-run profits for the alternative he will select?
Trang 1568 If he feels the chances of low, normal, and high precipitation are 30%, 20%, and 50%
respectively, what is his expected value of perfect information?
D either one or two
E either two or three
D either one or two
E either two or three
D either one or two
E either two or three
Trang 16
72 If she feels the chances of low, medium, and high compliance are 20%, 30%, and 50%
respectively, what are the expected net revenues for the number of assistants she will decide to hire?
73 If she feels the chances of low, medium, and high compliance are 20%, 30%, and 50%
respectively, what is her expected value of perfect information?
D either single family or apartments
E either apartments or condos
D either single family or apartments
E either apartments or condos
Trang 17
76 If he uses the minimax regret criterion, which kind of dwellings will he decide to build?
A single family
B apartments
C condos
D either single family or apartments
E either apartments or condos
D either single family or apartments
E either apartments or condos
D either small or Medium
E either medium or large
Trang 18
80 If she uses the maximin criterion, what size outlet will she decide to lease?
A small
B Medium
C large
D either small or Medium
E either medium or large
D either small or Medium
E either medium or large
D either small or Medium
E either medium or large
Trang 1985 If she feels there is a 30% chance that demand will be high, what is her expected value of perfect information?
Trang 20
89 If she uses the maximax criterion, which advertising strategy will she use?
A print
B mixed
C television
D either print or mixed
E either mixed or television
D either print or mixed
E either mixed or television
D either print or mixed
E either mixed or television
D either print or mixed
E either mixed or television
Trang 2194 If she feels that there is a 60% chance that the new cable network will be successful, what is her expected cost (per thousand "hits") under certainty?
Trang 22The head of operations for a movie studio wants to determine which of two new scripts they should select for their next major production (Due to budgeting constraints, only one new picture can be undertaken at this time.) She feels that script #1 has a 70 percent chance of earning about
$10,000,000 over the long run, but a 30 percent chance of losing $2,000,000 If this movie is
successful, then a sequel could also be produced, with an 80 percent chance of earning $5,000,000, but a 20 percent chance of losing $1,000,000 On the other hand, she feels that script #2 has a 60 percent chance of earning $12,000,000, but a 40 percent chance of losing $3,000,000 If successful, its sequel would have a 50 percent chance of earning $8,000,000, but a 50 percent chance of losing
$4,000,000 Of course, in either case, if the original movie were a "flop," then no sequel would be produced
Trang 23103 What is the expected value for the optimum decision alternative?
$100,000 in outside funding from the American Cancer Society next year, and an 80 percent chance
of getting nothing If the cancer research lab is funded the first year, no additional outside funding will
be available the second year However, if it is not funded the first year, then management estimates the chances are 50 percent it will get $100,000 the following year, and 50 percent that it will get
nothing again If, however, Merciless's management decides to go with the heart lab, then there's a
50 percent chance of getting $50,000 in outside funding from the American Heart Association the first year and a 50 percent change of getting nothing If the heart lab is funded the first year, management estimates a 40 percent chance of getting another $50,000 and a 60 percent chance of getting nothing additional the second year If it is not funded the first year, then management estimates a 60 percent chance for getting $50,000 and a 40 percent chance for getting nothing in the following year For both the cancer and heart research labs, no further possible funding is anticipated beyond the first two years
Trang 24107 What is the expected value for the decision alternative to select the heart lab?
publisher, with ultimate sales of 30,000 copies On the other hand, if they write a statistics book, they feel they have a 40 percent chance of placing it with a major publisher, and it should result in ultimate sales of about 50,000 copies If they can't get a major publisher to take it, they feel they have a 50 percent chance of placing it with a smaller publisher, with ultimate sales of 35,000 copies
Trang 25111 What is the expected value for the decision alternative to write the economics book?
114 When a decision-making scenario involves two or more departments, if the individual
departments pursue what is optimal for them, sometimes the overall organization suffers This is an example of _
A subminimimization
B suboptimization
C rational boundaries
D decision making under risk
E decision making under uncertainty
115 Which of the following is not a stage in the decision making process?
A select the best alternative
B develop suitable alternatives
C analyze and compare alternatives
D monitor the competition
E specify objectives
Trang 26
116 Option A has a payoff of $10,000 in environment 1 and $20,000 in environment 2 Option B has
a payoff of $5,000 in environment 1 and $27,500 in environment 2 Once the probability of
environment 1 exceeds , option A becomes the better choice
117 Option A has a payoff of $10,000 in environment 1 and $20,000 in environment 2 Option B has
a payoff of $12,500 in environment 1 and $17,500 in environment 2 Once the probability of
environment 2 exceeds , option A becomes the better choice
118 Which of the following would make decision trees an especially attractive decision making tool?
A The need to think through a possible sequence of decisions
B The need to maximize the expected value of perfect information
C The need to minimize expected regret
D The need to avoid suboptimization
E The need to minimize costs
Trang 27120 If you are uncertain which state of nature will occur, and use the maximin criterion, which
alternative will you select?
122 If you are uncertain which state of nature will occur, and use the Laplace criterion, which
alternative will you select?
Trang 28125 If you feel that P(#1) = 4, P(#2) = 3, P(#3) = 2, and P(#4) = 1, what is your expected payoff under certainty?
Trang 29Topic Area: Decision Trees
2 Bounded rationality refers to the limits imposed on decision-making because of costs, human abilities, time, technology, and/or availability of information
Topic Area: Causes of Poor Decisions
3 In reaching a decision, the alternative with the lowest cost should be ranked #1
Trang 304 The expected monetary value approach is most appropriate when the decision-maker is
Topic Area: Decision Making under Risk
5 The value of perfect information is inversely related to losses predicted
Topic Area: Expected Value of Perfect Information
6 Expected monetary value gives the long-run average payoff if a large number of identical decisions could be made
Trang 317 Among decision environments, risk implies that certain parameters have probabilistic outcomes
Topic Area: Decision Making under Risk
8 Among decision environments, uncertainty implies that states of nature have wide ranging
probabilities associated with them
Topic Area: Decision Making under Uncertainty
9 In decision theory, states of nature refer to possible future conditions
Topic Area: Decision Environments
10 The maximin approach involves choosing the alternative with the highest payoff
Trang 3211 The maximin approach involves choosing the alternative that has the "best worst" payoff
Topic Area: Decision Making under Uncertainty
12 The Laplace criterion treats states of nature as being equally likely
Topic Area: Decision Making under Uncertainty
13 The maximax approach is a pessimistic strategy
Topic Area: Decision Making under Uncertainty
14 A weakness of the maximin approach is that it loses some information
Trang 3315 The expected value approach applies to decision-making under uncertainty
Topic Area: Decision Making under Risk
16 The expected value approach is used for decision-making under risk
Topic Area: Decision Making under Risk
17 The EVPI indicates an upper limit on the amount a decision-maker should be willing to spend to obtain additional information
Topic Area: Expected Value of Perfect Information
18 Graphical sensitivity analysis is limited to cases with no more than two alternatives
Trang 3419 Graphical sensitivity analysis is used for decision-making under risk
Topic Area: Sensitivity Analysis
20 An advantage of decision trees compared to payoff tables is that they permit us to analyze situations involving sequential decisions
Topic Area: Decision Trees
21 The term sub-optimization is best described as the:
A result of individual departments making the best decisions for their own areas
B limitations on decision-making caused by costs and time
C result of failure to adhere to the steps in the decision process
D result of ignoring symptoms of the problem
E none of the above
Sometimes the best decisions for individual departments do not lead to the best decision overall
Trang 3522 Which phrase best describes the term bounded rationality?
A thinking a problem through clearly before acting
B taking care not to exhaust limited resources
C the result of departmentalized decision making
D limits imposed on decision making by costs, time, and technology
E the use of extremely structured steps in the decision making process
Bounded rationality reflects the fact that there are limits to how much information can be incorporated
in the decision making process
Topic Area: Causes of Poor Decisions
23 Testing how a problem solution reacts to changes in one or more of the model parameters is called:
Topic Area: Sensitivity Analysis
24 Sensitivity analysis is required because _
A payoffs and probabilities are estimates
B most decision will affect employees
C expected payoffs are sensitive to the time value of money
D it's the second step in the decision model
E with the passage of time, small decisions get bigger
Because the solution can be based on estimated values, sensitivity analysis allows for the evaluation
Trang 3625 A tabular presentation that shows the outcome for each decision alternative under the various possible states of nature is called a/an:
A payoff table
B feasible region
C LaPlace table
D decision tree
E payback period matrix
The payoff table summarizes the decision-making scenario
Topic Area: Introduction
26 Which of the following characterizes decision-making under uncertainty?
A Decision-makers must rely on probabilities in assessing outcomes
B The likelihood of possible future events is unknown
D Certain parameters have probabilistic outcomes
E none of the above
Uncertainty means likelihoods are unknown and cannot be reasonably estimated
Topic Area: Decision Making under Uncertainty
27 Which of the following is not an approach for decision-making under uncertainty?
Trang 3728 Determining the worst payoff for each alternative and choosing the alternative with the "best worst" is the approach called:
Topic Area: Decision Making under Uncertainty
29 Determining the average payoff for each alternative and choosing the alternative with the highest average is the approach called:
Topic Area: Decision Making under Uncertainty
30 The maximin approach to decision-making refers to:
B maximizing the minimum return
D choosing the alternative with the highest payoff
E choosing the alternative with the minimum payoff
Maximin seeks out the most attractive worst case scenario
Trang 3831 Which one of these is not used in decision-making under risk?
A EVPI
B EMV
C decision trees
D minimax regret
E All are used for risk situations
Minimax regret is for decision-making under uncertainty
Topic Area: Decision Making under Risk
32 The term opportunity loss or regret is most closely associated with:
Topic Area: Decision Making under Uncertainty
33 The expected monetary value criterion (EMV) is the decision-making approach used with the decision environment of:
A certainty
B risk
C uncertainty
D all of the above
E none of the above
Decisions are compared on the basis of EMV under risk
Trang 3934 A decision tree is:
A an algebraic representation of alternatives
B a behavioral representation of alternatives
C a matrix representation of alternatives
D a schematic representation of alternatives
E limited to a maximum of 12 branches
It plots out possible sequences of decision-making
Topic Area: Decision Trees
35 The difference between expected payoff under certainty and expected payoff under risk is the expected:
A monetary value
B value of perfect information
C net present value
Topic Area: Expected Value of Perfect Information
36 If the minimum expected regret is computed, it indicates to a decision-maker the expected:
A value of perfect information
B payoff under certainty
C monetary value
D payoff under risk
E none of the above
With perfect information, expected regret is minimized
Trang 4037 The term sensitivity analysis is most closely associated with: