Question 1

EVPI equals the expected regret associated with the minimax decision.

Accepted Answer

A) True 
 B)False  True

Question 2

For the payoff table below, the decision maker will use P(s1) = .15, P(s2) = .5, and P(s3) = .35. $$\begin{array} { c | r r c } 
&{ \text { State of Nature } } \
\text { Decision } &  { \mathrm { s } _ { 1 } } &  { \mathrm { s } _ { 2 } } & \mathrm {~s} _ { 3 } \
\hline d _ { 1 } & - 5,000 & 1,000 & 10,000 \
d _ { 2 } & - 15,000 & - 2,000 & 40,000
\end{array}$$ What alternative would be chosen according to expected value?

Accepted Answer

EV(d₁) = 3250 and EV(d₂) = 10750, so choose d₂.

Question 3

Square nodes in a decision tree indicate that a decision must be made.

Accepted Answer

A) True 
 B)False  True

Question 4

States of nature should be defined so that one and only one will actually occur.

Accepted Answer

A) True 
 B)False

Question 5

How can a good decision maker "improve" luck?

Accepted Answer

A good decision maker can "improve" luck

Question 6

States of nature

Accepted Answer

A) can describe uncontrollable natural events such as floods or freezing temperatures. 
B) can be selected by the decision maker. 
C) cannot be enumerated by the decision maker. 
D) All of the alternatives are true. 
A) can describe uncontrollable natural events such as floods or freezing temperatures. 
B) can be selected by the decision maker. 
C) cannot be enumerated by the decision maker. 
D) All of the alternatives are true.

Question 7

If P(high) = .3, P(low) = .7, P(favorable | high) = .9, and P(unfavorable | low) = .6, then P(favorable) =

Accepted Answer

A) .10 
B) .27 
C) .30 
D) .55 
A) .10 
B) .27 
C) .30 
D) .55

Question 8

A decision tree

Accepted Answer

A) presents all decision alternatives first and follows them with all states of nature. 
B) presents all states of nature first and follows them with all decision alternatives. 
C) alternates the decision alternatives and states of nature. 
D) arranges decision alternatives and states of nature in their natural chronological order. 
A) presents all decision alternatives first and follows them with all states of nature. 
B) presents all states of nature first and follows them with all decision alternatives. 
C) alternates the decision alternatives and states of nature. 
D) arranges decision alternatives and states of nature in their natural chronological order.

Question 9

Risk analysis helps the decision maker recognize the difference between the expected value of a decision alternative and the payoff that may actually occur.

Accepted Answer

A) True 
 B)False

Question 10

The table shows both prospective profits and losses for a company, depending on what decision is made and what state of nature occurs. Use the information to determine what the company should do. $$\begin{array} { c | r r r } 
& & { \text { State of Nature } } \
\text { Decision } & s _ { 1 } & s _ { 2 } & s _ { 3 } \
\hline d _ { 1 } & 30 & 80 & - 30 \
d _ { 2 } & 100 & 30 & - 40 \
d _ { 3 } & - 80 & - 10 & 120 \
d _ { 4 } & 20 & 20 & 20
\end{array}$$ 
a.if an optimistic strategy is used.
b.if a conservative strategy is used.
c.if minimax regret is the strategy.

Accepted Answer

a.d₃ b.d₁ c.

Question 11

For a maximization problem, the conservative approach is often referred to as the

Accepted Answer

A) minimax approach 
B) maximin approach 
C) maximax approach 
D) minimin approach 
A) minimax approach 
B) maximin approach 
C) maximax approach 
D) minimin approach

Question 12

A decision maker who is considered to be a risk taker is faced with this set of probabilities and payoffs $$\begin{array} { c | ccc } 
&  { \text { State of Nature } } \
\text { Decision } & \mathrm { s } _ { 1 } & \mathrm {~s} _ { 2 } & \mathrm {~s} _ { 3 } \
\hline \mathrm { d } _ { 1 } & 5 & 10 & 20 \
\mathrm {~d} _ { 2 } & - 25 & 0 & 50 \
\mathrm {~d} _ { 3 } & - 50 & - 10 & 80 \
\hline \text { Probability } & .30 & .35 & .35
\end{array}$$ Rank the decision alternatives on the basis of expected value.

Accepted Answer

EV(d₁) = 12

Question 13

Making a good decision

Accepted Answer

A) requires probabilities for all states of nature. 
B) requires a clear understanding of decision alternatives, states of nature, and payoffs. 
C) implies that a desirable outcome will occur. 
D) All of the alternatives are true. 
A) requires probabilities for all states of nature. 
B) requires a clear understanding of decision alternatives, states of nature, and payoffs. 
C) implies that a desirable outcome will occur. 
D) All of the alternatives are true.

Question 14

The expected value of an alternative can never be negative.

Accepted Answer

A) True 
 B)False

Question 15

Sensitivity analysis considers

Accepted Answer

A) how sensitive the decision maker is to risk. 
B) changes in the number of states of nature. 
C) changes in the values of the payoffs. 
D) changes in the available alternatives. 
A) how sensitive the decision maker is to risk. 
B) changes in the number of states of nature. 
C) changes in the values of the payoffs. 
D) changes in the available alternatives.

Question 16

If p is the probability of Event 1 and (1-p) is the probability of Event 2, for what values of p would you choose A? B? C? Values in the table are payoffs. $$\begin{array} { c c c } 
\text { Choice/Event } & \text { Event 1 } & \text { Event 2 } \
\hline \text { A } & 0 & 20 \
\text { B } & 4 & 16 \
\text { C } & 8 & 0
\end{array}$$

Accepted Answer

Choose A if p @#LAT-DLM& .5, c

Question 17

The options from which a decision maker chooses a course of action are

Accepted Answer

A) called the decision alternatives. 
B) under the control of the decision maker. 
C) not the same as the states of nature. 
D) All of the alternatives are true. 
A) called the decision alternatives. 
B) under the control of the decision maker. 
C) not the same as the states of nature. 
D) All of the alternatives are true.

Question 18

Expected value is the sum of the weighted payoff possibilities at a circular node in a decision tree.

Accepted Answer

A) True 
 B)False

Question 19

Explain why the decision maker might feel uncomfortable with the expected value approach, and decide to use a non-probabilistic approach even when probabilities are available.

Accepted Answer

The decision maker might feel uncomforta

Question 20

Circular nodes in a decision tree indicate that it would be incorrect to choose a path from the node.

Accepted Answer

A) True 
 B)False

EVPI equals the expected regret associated with the minimax decision.

For the payoff table below, the decision maker will use P(s₁) = .15, P(s₂) = .5, and P(s₃) = .35. State of Nature Decision -5,000 1,000 10,000 -15,000 -2,000 40,000 What alternative would be chosen according to expected value?

Square nodes in a decision tree indicate that a decision must be made.

States of nature should be defined so that one and only one will actually occur.

How can a good decision maker "improve" luck?

States of nature

If P(high) = .3, P(low) = .7, P(favorable | high) = .9, and P(unfavorable | low) = .6, then P(favorable) =

A decision tree

Risk analysis helps the decision maker recognize the difference between the expected value of a decision alternative and the payoff that may actually occur.

For a maximization problem, the conservative approach is often referred to as the

A decision maker who is considered to be a risk taker is faced with this set of probabilities and payoffs State of Nature Decision 5 10 20 -25 0 50 -50 -10 80 Probability .30 .35 .35 Rank the decision alternatives on the basis of expected value.

Making a good decision

The expected value of an alternative can never be negative.

Sensitivity analysis considers

If p is the probability of Event 1 and (1-p) is the probability of Event 2, for what values of p would you choose A? B? C? Values in the table are payoffs. Choice/Event Event 1 Event 2 A 0 20 B 4 16 C 8 0

The options from which a decision maker chooses a course of action are

Expected value is the sum of the weighted payoff possibilities at a circular node in a decision tree.

Explain why the decision maker might feel uncomfortable with the expected value approach, and decide to use a non-probabilistic approach even when probabilities are available.

Circular nodes in a decision tree indicate that it would be incorrect to choose a path from the node.

Introduction

An Introduction to Linear Programming

Linear Programming: Sensitivity Analysis and Interpretation of Solution

Linear Programming Applications in Marketing, Finance and Operations Management

Advanced Linear Programming Applications

Distribution and Network Problems

Integer Linear Programming

Nonlinear Optimization Models

Project Scheduling: Pertcpm

Inventory Models

Waiting Line Models

Simulation

Multicriteria Decisions

Forecasting

Markov Processes

Linear Programming: Simplex Method

Simplex-Based Sensitivity Analysis and Duality

Solution Procedures for Transportation and Assignment Problems

Minimal Spanning Tree

Dynamic Programming

Filters

Exam 13: Decision Analysis

EVPI equals the expected regret associated with the minimax decision.

For the payoff table below, the decision maker will use P(s1) = .15, P(s2) = .5, and P(s3) = .35. State of Nature Decision -5,000 1,000 10,000 -15,000 -2,000 40,000 What alternative would be chosen according to expected value?

Square nodes in a decision tree indicate that a decision must be made.

States of nature should be defined so that one and only one will actually occur.

How can a good decision maker "improve" luck?

States of nature

If P(high) = .3, P(low) = .7, P(favorable | high) = .9, and P(unfavorable | low) = .6, then P(favorable) =

A decision tree

Risk analysis helps the decision maker recognize the difference between the expected value of a decision alternative and the payoff that may actually occur.

For a maximization problem, the conservative approach is often referred to as the

A decision maker who is considered to be a risk taker is faced with this set of probabilities and payoffs State of Nature Decision 5 10 20 -25 0 50 -50 -10 80 Probability .30 .35 .35 Rank the decision alternatives on the basis of expected value.

Making a good decision

The expected value of an alternative can never be negative.

Sensitivity analysis considers

If p is the probability of Event 1 and (1-p) is the probability of Event 2, for what values of p would you choose A? B? C? Values in the table are payoffs. Choice/Event Event 1 Event 2 A 0 20 B 4 16 C 8 0

The options from which a decision maker chooses a course of action are

Expected value is the sum of the weighted payoff possibilities at a circular node in a decision tree.

Explain why the decision maker might feel uncomfortable with the expected value approach, and decide to use a non-probabilistic approach even when probabilities are available.

Circular nodes in a decision tree indicate that it would be incorrect to choose a path from the node.

Introduction

An Introduction to Linear Programming

Linear Programming: Sensitivity Analysis and Interpretation of Solution

Linear Programming Applications in Marketing, Finance and Operations Management

Advanced Linear Programming Applications

Distribution and Network Problems

Integer Linear Programming

Nonlinear Optimization Models

Project Scheduling: Pertcpm

Inventory Models

Waiting Line Models

Simulation

Multicriteria Decisions

Forecasting

Markov Processes

Linear Programming: Simplex Method

Simplex-Based Sensitivity Analysis and Duality

Solution Procedures for Transportation and Assignment Problems

Minimal Spanning Tree

Dynamic Programming

Filters

For the payoff table below, the decision maker will use P(s₁) = .15, P(s₂) = .5, and P(s₃) = .35. State of Nature Decision -5,000 1,000 10,000 -15,000 -2,000 40,000 What alternative would be chosen according to expected value?