Question 1

With equally likely states of nature, the alternative that has the largest expected monetary value is:

Accepted Answer

A) A 
B) B 
C) C 
D) D 
E) E 
A) A 
B) B 
C) C 
D) D 
E) E

Question 2

Decision trees, with their predetermined analysis of a situation, are really not useful in making health care decisions since every person is unique.

Accepted Answer

A) True 
 B)False

Question 3

The expected monetary value approach is most appropriate when the decision-maker is risk-neutral.

Accepted Answer

A) True 
 B)False

Question 4

Determining the average payoff for each alternative and choosing the alternative with the highest average is the approach called:

Accepted Answer

A) minimin 
B) maximin 
C) maximax 
D) minimax regret 
E) Laplace 
A) minimin 
B) maximin 
C) maximax 
D) minimax regret 
E) Laplace

Question 5

A weakness of the maximin approach is that it loses some information.

Accepted Answer

A) True 
 B)False

Question 6

The EVPI indicates an upper limit on the amount a decision-maker should be willing to spend to obtain additional information.

Accepted Answer

A) True 
 B)False

Question 7

A tabular presentation that shows the outcome for each decision alternative under the various possible states of nature is called a/an:

Accepted Answer

A) payoff table 
B) feasible region 
C) Laplace table 
D) decision tree 
E) payback period matrix 
A) payoff table 
B) feasible region 
C) Laplace table 
D) decision tree 
E) payback period matrix

Question 8

Graphical sensitivity analysis is used for decision-making under risk.

Accepted Answer

A) True 
 B)False

Question 9

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?

Accepted Answer

A) $140,000 
B) $170,000 
C) $285,000 
D) $305,000 
E) $475,000 
A) $140,000 
B) $170,000 
C) $285,000 
D) $305,000 
E) $475,000

Question 10

If she uses the Laplace criterion, how many new examiners will she decide to hire?

Accepted Answer

A) one 
B) two 
C) three 
D) either one or two 
E) either two or three 
A) one 
B) two 
C) three 
D) either one or two 
E) either two or three

Question 11

If she uses the Laplace criterion, how many beauticians will she decide to hire?

Accepted Answer

A) one 
B) two 
C) three 
D) either one or two 
E) either two or three 
A) one 
B) two 
C) three 
D) either one or two 
E) either two or three

Question 12

If he feels the chances of low, moderate, and high demand are 30%, 30%, and 40% respectively, what is the expected annual profit for the bus that he will decide to purchase?

Accepted Answer

A) $15,000 
B) $61,000 
C) $69,000 
D) $72,000 
E) $87,000 
A) $15,000 
B) $61,000 
C) $69,000 
D) $72,000 
E) $87,000

Question 13

If she uses the maximin criterion, how many new examiners will she decide to hire?

Accepted Answer

A) one 
B) two 
C) three 
D) either one or two 
E) either two or three 
A) one 
B) two 
C) three 
D) either one or two 
E) either two or three

Question 14

-If you are uncertain which state of nature will occur, and use the maximax criterion, which alternative will you select?

Accepted Answer

The answer of  
-If you are uncertain which state...

Question 15

Which phrase best describes the term bounded rationality?

Accepted Answer

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 
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

Question 16

The maximax strategy would be:

Accepted Answer

A) A 
B) B 
C) C 
D) D 
E) E 
A) A 
B) B 
C) C 
D) D 
E) E

Question 17

What is the probability that the economics book would wind up being placed with a smaller publisher?

Accepted Answer

A) .8 
B) .5 
C) .4 
D) .2 
E) .1 
A) .8 
B) .5 
C) .4 
D) .2 
E) .1

Question 18

If she uses the maximax criterion, what size outlet will she decide to lease?

Accepted Answer

A) small 
B) Medium 
C) large 
D) either small or Medium 
E) either medium or large 
A) small 
B) Medium 
C) large 
D) either small or Medium 
E) either medium or large

Question 19

If she feels there is a 30% chance that demand will be high, what is her expected value of perfect information?

Accepted Answer

A) $1,600 
B) $1,100 
C) $1,000 
D) $900 
E) $500 
A) $1,600 
B) $1,100 
C) $1,000 
D) $900 
E) $500

Question 20

A manager has developed the following payoff table that indicates the profits associated with a set of alternatives under two possible states of nature.

Accepted Answer

@#IMG-DLM& Answer the following questions:
(A) If

Exam 21: Extension 5: Decision Theory

With equally likely states of nature, the alternative that has the largest expected monetary value is:

Decision trees, with their predetermined analysis of a situation, are really not useful in making health care decisions since every person is unique.

The expected monetary value approach is most appropriate when the decision-maker is risk-neutral.

Determining the average payoff for each alternative and choosing the alternative with the highest average is the approach called:

A weakness of the maximin approach is that it loses some information.

The EVPI indicates an upper limit on the amount a decision-maker should be willing to spend to obtain additional information.

A tabular presentation that shows the outcome for each decision alternative under the various possible states of nature is called a/an:

Graphical sensitivity analysis is used for decision-making under risk.

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?

If she uses the Laplace criterion, how many new examiners will she decide to hire?

If she uses the Laplace criterion, how many beauticians will she decide to hire?

If he feels the chances of low, moderate, and high demand are 30%, 30%, and 40% respectively, what is the expected annual profit for the bus that he will decide to purchase?

If she uses the maximin criterion, how many new examiners will she decide to hire?

-If you are uncertain which state of nature will occur, and use the maximax criterion, which alternative will you select?

Which phrase best describes the term bounded rationality?

The maximax strategy would be:

What is the probability that the economics book would wind up being placed with a smaller publisher?

If she uses the maximax criterion, what size outlet will she decide to lease?

If she feels there is a 30% chance that demand will be high, what is her expected value of perfect information?

A manager has developed the following payoff table that indicates the profits associated with a set of alternatives under two possible states of nature.

Introduction to Operations Management

Competitiveness, Strategy, and Productivity

Forecasting

Product and Service Design

Strategic Capacity Planning for Products and Services

Process Selection and Facility Layout

Work Design and Measurement

Location Planning and Analysis

Management of Quality

Quality Control

Aggregate Planning and Master Scheduling

MRP and ERP

Inventory Management

Jit and Lean Operations

Supply Chain Management

Scheduling

Project Management

Management of Waiting Lines

Linear Programming

Extension 4: Reliability

Extension 7: Learning Curves

Extension 8: The Transportation Model

Extension 10: Acceptance Sampling

Extension 14: Maintenance

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