Exam 20: Decision Making

SCENARIO 20-6 A student wanted to find out the optimal strategy to study for a Business Statistics exam.He constructed the following payoff table based on the mean amount of time he needed to study every week for the course and the degree of difficulty of the exam.From the information that he gathered from students who had taken the course, he concluded that there was a 40% probability that the exam would be easy. -True or False: Referring to Scenario 20-6, the optimal strategy using the return-to-risk ratio criterion is to study 8 hours per week on average for the exam.

SCENARIO 20-1 -Referring to Scenario 20-1, if the probability of S1 is 0.2 and S2 is 0.8, then the expected opportunity Loss (EOL)for A1 is

SCENARIO 20-3 -Referring to Scenario 20-3, what is the coefficient of variation for investment A?

SCENARIO 20-4 -Referring to Scenario 20-4, what is the return to risk ratio?

A company that manufactures designer jeans is contemplating whether to increase its advertising Budget by $1 million for next year.If the expanded advertising campaign is successful, the company Expects sales to increase by $1.6 million next year.If the advertising campaign fails, the company Expects sales to increase by only $400,000 next year.If the advertising budget is not increased, the Company expects sales to increase by $200,000.Identify the outcomes in this decision-making Problem.

SCENARIO 20-6 A student wanted to find out the optimal strategy to study for a Business Statistics exam.He constructed the following payoff table based on the mean amount of time he needed to study every week for the course and the degree of difficulty of the exam.From the information that he gathered from students who had taken the course, he concluded that there was a 40% probability that the exam would be easy. -True or False: Referring to Scenario 20-6, the optimal strategy using the maximin criterion is to study 8 hours per week on average for the exam.

A medical doctor is involved in a $1 million malpractice suit.He can either settle out of court for $250,000 or go to court.If he goes to court and loses, he must pay $825,000 plus $175,000 in court Costs.If he wins in court the plaintiffs pay the court costs.Identify the outcomes of this decision- Making problem.

A medical doctor is involved in a $1 million malpractice suit.He can either settle out of court for $250,000 or go to court.If he goes to court and loses, he must pay $825,000 plus $175,000 in court Costs.If he wins in court the plaintiffs pay the court costs.Identify the states of nature of this Decision-making problem.

SCENARIO 20-5 -Referring to Scenario 20-5, what is the EOL for Action A?

SCENARIO 20-6 A student wanted to find out the optimal strategy to study for a Business Statistics exam.He constructed the following payoff table based on the mean amount of time he needed to study every week for the course and the degree of difficulty of the exam.From the information that he gathered from students who had taken the course, he concluded that there was a 40% probability that the exam would be easy. -True or False: Referring to Scenario 20-6, the optimal strategy using the maximin criterion is to study 16 hours per week on average for the exam.

SCENARIO 20-6 A student wanted to find out the optimal strategy to study for a Business Statistics exam.He constructed the following payoff table based on the mean amount of time he needed to study every week for the course and the degree of difficulty of the exam.From the information that he gathered from students who had taken the course, he concluded that there was a 40% probability that the exam would be easy. -True or False: Referring to Scenario 20-6, the optimal strategy using the expected opportunity loss criterion is to study 8 hours per week on average for the exam.

SCENARIO 20-4 -Referring to Scenario 20-4, what is the coefficient of variation?

SCENARIO 20-6 A student wanted to find out the optimal strategy to study for a Business Statistics exam.He constructed the following payoff table based on the mean amount of time he needed to study every week for the course and the degree of difficulty of the exam.From the information that he gathered from students who had taken the course, he concluded that there was a 40% probability that the exam would be easy. -Referring to Scenario 20-6, what is the maximum amount that the student is willing to pay to obtain perfect information?

SCENARIO 20-5 -Referring to Scenario 20-5, what is the opportunity loss for Action A with Event 2?

Look at the utility function graphed below and select the type of decision maker that corresponds to The graph.

SCENARIO 20-6 A student wanted to find out the optimal strategy to study for a Business Statistics exam.He constructed the following payoff table based on the mean amount of time he needed to study every week for the course and the degree of difficulty of the exam.From the information that he gathered from students who had taken the course, he concluded that there was a 40% probability that the exam would be easy. -Referring to Scenario 20-6, how many possible events are there?

SCENARIO 20-1 -Referring to Scenario 20-1, if the probability of S1 is 0.2, what is the optimal alternative using EOL?

For a potential investment of $5,000, a portfolio has an EMV of $1,000 and a standard deviation of $100.What is the coefficient of variation?

SCENARIO 20-6 A student wanted to find out the optimal strategy to study for a Business Statistics exam.He constructed the following payoff table based on the mean amount of time he needed to study every week for the course and the degree of difficulty of the exam.From the information that he gathered from students who had taken the course, he concluded that there was a 40% probability that the exam would be easy. -True or False: Referring to Scenario 20-6, the optimal strategy using the maximax criterion is to study 16 hours per week on average for the exam.

The difference between expected payoff under certainty and expected value of the best act without Certainty is the: