Question 1

Based on the radar chart of the weighted scores provided below, which of the following interpretations is incorrect?

Accepted Answer

A)  Site A wins on the Sales criteria but is last on the Location criteria. 
B)  Site C wins on the Security criteria and scores high on the remaining three criteria. 
C)  Site B scores lowest on each of the four criteria. 
D)  No site dominates on each of the four criteria. 
A)  Site A wins on the Sales criteria but is last on the Location criteria. 
B)  Site C wins on the Security criteria and scores high on the remaining three criteria. 
C)  Site B scores lowest on each of the four criteria. 
D)  No site dominates on each of the four criteria.

Question 2

A course of action intended to solve a problem is called a(n)

Accepted Answer

A)  alternative. 
B)  option. 
C)  decision. 
D)  criteria. 
A)  alternative. 
B)  option. 
C)  decision. 
D)  criteria.

Question 3

A company is planning a plant expansion. They can build a large or small plant. The payoffs for the plant depend on the level of consumer demand for the company's products. The company believes that there is an 69% chance that demand for their products will be high and a 31% chance that it will be low. The company can pay a market research firm to survey consumer attitudes towards the company's products. There is a 63% chance that the customers will like the products and a 37% chance that they won't. The payoff matrix and costs of the two plants are listed below. The company believes that if the survey is favorable there is a 92% chance that demand will be high for the products. If the survey is unfavorable there is only a 30% chance that the demand will be high. The following decision tree has been built for this problem. The company has computed that the expected monetary value of the best decision without sample information is 154.35 million. What is the EVSI for this problem (in $ million)? $\quad $$\quad $$\quad $$\quad $$\quad $$\quad $$\quad $$\quad $$\quad $$\underline{\text { Demand} }$
$\begin{array}{l}
\begin{array} { l c c c } 
\text { Factory Gize } & \text { High } & \text { Low } & \text { Plant Cost (\$million) } \
\hline \text { Large } & 200 & 85 & 10 \
\text { Small } & 100 & 95 & 2
\end{array}
\end{array}$

Accepted Answer

A)  0.07 
B)  26.38 
C)  109.5 
D)  180.8 
A)  0.07 
B)  26.38 
C)  109.5 
D)  180.8

Question 4

Exhibit 14.10
The following questions are based on the information below.
An investor is considering 4 investments, W, X, Y, and Z. The payoff from each investment is a function of the economic climate over the next 2 years. The economy can expand or decline. The following payoff matrix has been developed for the decision problem. The investor has estimated the probability of a declining economy at 80% and an expanding economy at 20%.
  
-Refer to Exhibit 14.10. Complete the Regret Table according to the expected regret decision rule.

Accepted Answer

The answer of Exhibit 14.10
The following questions are based on...

Question 5

The scores in a scoring model range from

Accepted Answer

A)  0 to 1 
B)  F1F1F1S1F1F1F101 to +1 
C)  0 to 5 
D)  0 to 10 
A)  0 to 1 
B)  F1F1F1S1F1F1F101 to +1 
C)  0 to 5 
D)  0 to 10

Question 6

Exhibit 14.9
The following questions are based on the information below.
An investor is considering 4 investments, W, X, Y, and Z. The payoff from each investment is a function of the economic climate over the next 2 years. The economy can expand or decline. The following payoff matrix has been developed for the investment decision problem.
  
-Refer to Exhibit 14.9. What formula should go in cell D5 and get copied to D6:D8 to implement the maximax decision rule?

Accepted Answer

The answer of Exhibit 14.9
The following questions are based on...

Question 7

Exhibit 14.7
The following questions use the information below.
A decision maker is faced with two alternatives. The decision maker has determined that she is indifferent between the two alternatives when p = 0.45.
 $ \begin{array}{ll}\text { Alternative 1: } & \text { Receive } \$ 82,000 \text { with certainty } \ \text { Alternative 2: } & \text { Receive } \$ 143,000 \text { with probability } \mathrm{p} \text { and lose } \$ 15,000 \text { with probability (1 -p)}\end{array} $

-Refer to Exhibit 14.7. What is the decision maker's certainty equivalent for this problem?

Accepted Answer

A)  F1F1F1S1?F1F1F10$15,000 
B)  $82,000 
C)  $56,100 
D)  $82,000. 
A)  F1F1F1S1?F1F1F10$15,000 
B)  $82,000 
C)  $56,100 
D)  $82,000.

Question 8

Exhibit 14.1
The following questions are based on the information below.
An investor is considering 4 investments, A, B, C and leaving his money in the bank. The payoff from each investment is a function of the economic climate over the next 2 years. The economy can expand or decline. The following payoff matrix has been developed for the decision problem.
  
-Refer to Exhibit 14.1. What formula should go in cell D5 to implement the maximax decision rule?

Accepted Answer

A)  =MAX(MAX(B5:C5)) 
B)  =MIN(B5:C5) 
C)  =AVERAGE(B5:C5) 
D)  =MAX(B5:C5) 
A)  =MAX(MAX(B5:C5)) 
B)  =MIN(B5:C5) 
C)  =AVERAGE(B5:C5) 
D)  =MAX(B5:C5)

Question 9

The ____ correspond to future events that are not under the control of the decision maker.

Accepted Answer

A)  payoffs 
B)  states of nature 
C)  criteria 
D)  alternatives 
A)  payoffs 
B)  states of nature 
C)  criteria 
D)  alternatives

Question 10

Exhibit 14.7
The following questions use the information below.
A decision maker is faced with two alternatives. The decision maker has determined that she is indifferent between the two alternatives when p = 0.45.
 $ \begin{array}{ll}\text { Alternative 1: } & \text { Receive } \$ 82,000 \text { with certainty } \ \text { Alternative 2: } & \text { Receive } \$ 143,000 \text { with probability } \mathrm{p} \text { and lose } \$ 15,000 \text { with probability (1 -p)}\end{array} $

-Refer to Exhibit 14.7. What is the expected value of Alternative 2 for this decision maker?

Accepted Answer

A)  $82,000 
B)  $56,100 
C)  $64,350 
D)  $72,600 
A)  $82,000 
B)  $56,100 
C)  $64,350 
D)  $72,600

Question 11

The decision rule which determines the maximum payoff for each alternative and then selects the alternative associated with the largest payoff is the

Accepted Answer

A)  maximax decision rule. 
B)  maximin decision rule. 
C)  minimax regret decision rule. 
D)  minimin decision rule. 
A)  maximax decision rule. 
B)  maximin decision rule. 
C)  minimax regret decision rule. 
D)  minimin decision rule.

Question 12

Exhibit 14.12
The following questions use the information below.
A decision maker is faced with two alternatives.
 Altermatrve 1: Recerve $4,000 wrth certannty
Alternative 2: Receive $80,000 with prabability $p$ and lose $5,000 with probability (1 -p). The decision maker has determined that she is indifferent between the two alternatives when p = 0.7.
-Refer to Exhibit 14.12. What is the expected value of Alternative 2 for this decision maker?

Accepted Answer

= 80,000 * .7 F1F1F1

Question 13

The total worth, value or desirability of a decision alternative is called its

Accepted Answer

A)  usefulness. 
B)  worthiness. 
C)  utility. 
D)  risk. 
A)  usefulness. 
B)  worthiness. 
C)  utility. 
D)  risk.

Question 14

Exhibit 14.4
The following questions are based on the information below.
  
-Refer to Exhibit 14.4. What is the expected value of perfect information for the investor?

Accepted Answer

A)  13.5 
B)  20 
C)  45.5 
D)  59 
A)  13.5 
B)  20 
C)  45.5 
D)  59

Question 15

Exhibit 14.8
The following questions use the information below.
A company needs to buy a new insurance policy. They have three policies to choose from, A, B and C. The policies differ with respect to price, coverage and ease of billing. The company has developed the following AHP tables for price and summary. The other tables are not shown due to space limitations.
    
-Refer to Exhibit 14.8. What formula should go in cell F11 and get copied to F12:F13 of the Price worksheet to compute the Price Score?

Accepted Answer

A)  =AVERAGE(C4:C6) 
B)  =AVERAGE(C11:E11) 
C)  =AVERAGE(G11:G13) 
D)  =AVERAGE(C7:E7) 
A)  =AVERAGE(C4:C6) 
B)  =AVERAGE(C11:E11) 
C)  =AVERAGE(G11:G13) 
D)  =AVERAGE(C7:E7)

Question 16

Exhibit 14.8
The following questions use the information below.
A company needs to buy a new insurance policy. They have three policies to choose from, A, B and C. The policies differ with respect to price, coverage and ease of billing. The company has developed the following AHP tables for price and summary. The other tables are not shown due to space limitations.
    
-Refer to Exhibit 14.8. Which policy should the company choose based on the Summary worksheet?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  None of these 
A)  A 
B)  B 
C)  C 
D)  None of these

Question 17

Exhibit 14.14
The following questions use the Decision Tree model and strategy table information below.
    
-Refer to Exhibit 14.14. Why does the strategy table, examining the risk associated with P(G|A) and P(G|B) never show "Sell A" or "Trade B for D" as selected options?

Accepted Answer

The expected value of Trade A

Question 18

The amount of opportunity lost in making a decision is called

Accepted Answer

A)  loss. 
B)  frustration. 
C)  negative profit. 
D)  regret. 
A)  loss. 
B)  frustration. 
C)  negative profit. 
D)  regret.

Question 19

An investor is considering 2 investments, A, B, which can be purchased now for $10. There is a 40% chance that investment A will grow rapidly in value and a 60% chance that it will grow slowly. If A grows rapidly the investor can cash it in for $80 or trade it for investment C which has a 25% chance of growing to $100 and a 75% chance of reaching $80. If A grows slowly it is sold for $50. There is a 70% chance that investment B will grow rapidly in value and a 30% chance that it will grow slowly. If B grows rapidly the investor can cash it in for $100 or trade it for investment D which has a 20% chance of growing to $95 and an 80% chance of reaching $80. If B grows slowly it is sold for $45. Draw the decision tree for this problem.

Accepted Answer

The answer of An investor is considering 2 investments, A,...

Question 20

Exhibit 14.13
The following questions use the information below.
A student wants to buy a new car. She has three cars to choose from, A, B and C. The cars differ with respect to price, performance and looks. The student has developed the following AHP tables for price and summary. The other tables are not shown due to space limitations.
    
-Refer to Exhibit 14.13. Which car should the student choose based on the Summary worksheet?

Accepted Answer

The answer of Exhibit 14.13
The following questions use the information...

Based on the radar chart of the weighted scores provided below, which of the following interpretations is incorrect?

A course of action intended to solve a problem is called a(n)

The scores in a scoring model range from

The ____ correspond to future events that are not under the control of the decision maker.

The decision rule which determines the maximum payoff for each alternative and then selects the alternative associated with the largest payoff is the

The total worth, value or desirability of a decision alternative is called its

Exhibit 14.4 The following questions are based on the information below. -Refer to Exhibit 14.4. What is the expected value of perfect information for the investor?

Exhibit 14.14 The following questions use the Decision Tree model and strategy table information below. -Refer to Exhibit 14.14. Why does the strategy table, examining the risk associated with P(G|A) and P(G|B) never show "Sell A" or "Trade B for D" as selected options?

The amount of opportunity lost in making a decision is called

Introduction to Modeling and Decision Analysis

Introduction to Optimization and Linear Programming

Modeling and Solving Lp Problems in a Spreadsheet

Sensitivity Analysis and the Simplex Method

Network Modeling

Integer Linear Programming

Goal Programming and Multiple Objective Optimization

Nonlinear Programming and Evolutionary Optimization

Regression Analysis

Discriminant Analysis

Time Series Forecasting

Introduction to Simulation Using Risk Solver Platform

Queuing Theory

Project Management Online

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Exam 14: Decision Analysis

Based on the radar chart of the weighted scores provided below, which of the following interpretations is incorrect?

A course of action intended to solve a problem is called a(n)

The scores in a scoring model range from

The ____ correspond to future events that are not under the control of the decision maker.

The decision rule which determines the maximum payoff for each alternative and then selects the alternative associated with the largest payoff is the

The total worth, value or desirability of a decision alternative is called its

Exhibit 14.4 The following questions are based on the information below. -Refer to Exhibit 14.4. What is the expected value of perfect information for the investor?

Exhibit 14.14 The following questions use the Decision Tree model and strategy table information below. -Refer to Exhibit 14.14. Why does the strategy table, examining the risk associated with P(G|A) and P(G|B) never show "Sell A" or "Trade B for D" as selected options?

The amount of opportunity lost in making a decision is called

Introduction to Modeling and Decision Analysis

Introduction to Optimization and Linear Programming

Modeling and Solving Lp Problems in a Spreadsheet

Sensitivity Analysis and the Simplex Method

Network Modeling

Integer Linear Programming

Goal Programming and Multiple Objective Optimization

Nonlinear Programming and Evolutionary Optimization

Regression Analysis

Discriminant Analysis

Time Series Forecasting

Introduction to Simulation Using Risk Solver Platform

Queuing Theory

Project Management Online

Filters