Question 1

Which decision rule pessimistically assumes that nature will always be "against us" regardless of what decision we make?

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 2

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.
   $\begin{array}{|c|c|c|c|c|c|c|c}
\hline & \text { A } & \text { B } & \text { C } & \text { D } & \text { E } & \text { F } & \text { G } \
\hline 1 & & & & & & & \
\hline 2 & & & & & & & \
\hline 3 & & \text { Criterion } & \text { A } & \text { B } & \text { C } & & \
\hline 4 & & \text { Price } & 0.648 & 0.230 & 0.122 & & 0.123 \
\hline 5 & & \text { Coverage } & 0.213 & 0.701 & 0.085 & & 0.320 \
\hline 7 & & \text { Billing } & 0.120 & 0.272 & 0.608 & & 0.557 \
\hline 7 & & \text { Weighted Avg Score: } & 0.215 & 0.404 & 0.381 & & 1.000 \
\hline & & \text { Summary } & & & & & \
\hline
\end{array}$

-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 3

An investor is considering 4 investments,A,B,C,D.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 decision tree has been developed for the problem.The investor has estimated the probability of a declining economy at 25% and an expanding economy at 75%.What is the correct decision for this investor based on an expected monetary value criteria? Draw the decision tree for this problem.

Accepted Answer

The answer of An investor is considering 4 investments,A,B,C,D.The payoff...

Question 4

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.What is the multistage decision for this investor and what is the EMV for this decision?

Accepted Answer

Pick B,Sel

Question 5

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.
Alternative 1: Receive $82,000 with certainty
Alternative 2: Receive $143,000 with probability p and lose $15,000 with probability 1 − p).
-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 6

Although modeling provides valuable insight to decision makers,decision making remains a difficult task.Which of the following is not a primary cause for this difficulty discussed in the Decision Analysis chapter?

Accepted Answer

A) Uncertainty regarding the future. 
B) Models provide decisions for the decision maker. 
C) Conflicting values. 
D) Conflicting objectives. 
A) Uncertainty regarding the future. 
B) Models provide decisions for the decision maker. 
C) Conflicting values. 
D) Conflicting objectives.

Question 7

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 following table to determine the expected value of perfect information for the investor.

Accepted Answer

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

Question 8

Exhibit 14.5
The following questions are based on the information below.
An investor is considering 4 investments,A,B,C,D.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 decision tree has been developed for the problem.The investor has estimated the probability of a declining economy at 40% and an expanding economy at 60%.  
-Refer to Exhibit 14.5.What is the correct decision for this investor based on an expected monetary value criteria?

Accepted Answer

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

Question 9

The maximin approach to decision-making

Accepted Answer

A) maximizes the minimum return 
B) maximizes the maximum return 
C) maximizes the minimum regret 
D) minimizes the minimum regret 
A) maximizes the minimum return 
B) maximizes the maximum return 
C) maximizes the minimum regret 
D) minimizes the minimum regret

Question 10

Based on the radar chart of raw scores provided below,why is this decision complex?

Accepted Answer

A) The chart is hard to read. 
B) No site wins on all four criteria. 
C) No site achieves a perfect score of 1.0 on a criteria. 
D) No sites have sufficient security. 
A) The chart is hard to read. 
B) No site wins on all four criteria. 
C) No site achieves a perfect score of 1.0 on a criteria. 
D) No sites have sufficient security.

Question 11

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.
   $\begin{array}{|c|c|c|c|c|c|c|c}
\hline & \text { A } & \text { B } & \text { C } & \text { D } & \text { E } & \text { F } & \text { G } \
\hline 1 & & & & & & & \
\hline 2 & & & & & & & \
\hline 3 & & \text { Criterion } & \text { A } & \text { B } & \text { C } & & \
\hline 4 & & \text { Price } & 0.648 & 0.230 & 0.122 & & 0.123 \
\hline 5 & & \text { Coverage } & 0.213 & 0.701 & 0.085 & & 0.320 \
\hline 7 & & \text { Billing } & 0.120 & 0.272 & 0.608 & & 0.557 \
\hline 7 & & \text { Weighted Avg Score: } & 0.215 & 0.404 & 0.381 & & 1.000 \
\hline & & \text { Summary } & & & & & \
\hline
\end{array}$

-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) =AVERAGEC4:C6) 
B) =AVERAGEC11:E11) 
C) =AVERAGEG11:G13) 
D) =AVERAGEC7:E7) 
A) =AVERAGEC4:C6) 
B) =AVERAGEC11:E11) 
C) =AVERAGEG11:G13) 
D) =AVERAGEC7:E7)

Question 12

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.What formula should go in cell G11 and copied to cells G12:G13 of the Price worksheet to compute the Consistency Measure?

Accepted Answer

=MMULTC4:E

Question 13

Project 14.1 ? The Pre-Paid Gas Tank Decision
Your company has sent you on business to the Los Angeles LA)metropolitan area.Upon your arrival at LAX,you make your way to the Klunker Car Rental counter.As usual,the line at the counter is long,so you enter and begin your wait.While waiting you notice that Klunker is offering a special deal on gas.They are selling gas for
$1.579 per gallon.However,you must purchase a full tank when you rent the car.Klunker also says that the average price per gallon of gas in the LA area is $1.60.You are uncertain of several necessary pieces of information to determine whether you should take advantage of this deal.These are:
· the total miles you will drive on the trip;
· rental car gas mileage;
· how much gas the rental car's tank holds;
· the true cost of gas in the LA area.
First,you expect to drive between 150 and 250 miles on this trip.You believe there is an equal chance that you will drive either of these extreme amounts.However,you may have to make a side trip to Edwards AFB that will increase the total miles to 500.You believe there is a 1 in 5 chance that this will happen.Normally,Klunker rents you a mid-size car.You believe most cars in this class have either a 15 gallon gas tank with 60% confidence or a 18 gallon gas tank with 40% confidence.You've heard that cars in this class get as much as 25 mpg on the highway but may get as little as 18 mpg city driving.You decide there is an 70% chance most of your driving will
be on the freeways and the rest in the city.Finally,you don't believe Klunker's posted average price of $1.60 per gallon in the LA area.You guess that there is 40% chance that the gas will be $1.259,20% chance it will be $1.479 and a 40% chance it will be $1.659.Assume you must decide whether to pre-purchase the tank of gas prior to talking to a Klunker clerk.
a.Draw the decision tree for this problem using Decision Tree in Excel.
b.What is the optimal decision?
Now suppose you can delay your decision until you speak to a clerk and find out exactly how
c.much gas your rental car holds.The clerk says the car you will rent holds 18 gallons of gas.What is your optimal decision now? What is the value of this additional information?

Accepted Answer

@#IMG-DLM& b. Based on the decision tree with the

Question 14

The expected monetary value criterion EMV)is the decision-making approach used

Accepted Answer

A) in decision-making under risk 
B) in decision-making under uncertainty 
C) in decision-making under certainty 
D) all of the above 
A) in decision-making under risk 
B) in decision-making under uncertainty 
C) in decision-making under certainty 
D) all of the above

Question 15

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 PG|A)and PG|B)never show "Sell A" or "Trade B for D" as selected options?

Accepted Answer

The expected value of Trade A

Question 16

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.
 $\begin{array}{|c|c|c|c|c|c|}
\hline & \mathrm{A} & \mathrm{B} & \mathrm{C} & \mathrm{D} & E \
\hline 1 & & \begin{array}{|ll} 
& \text { Payoff } \
\text { Matrix } & \
\end{array} & & & \
\hline 2 & & & & & \
\hline 3 & & \text { Economy } & & & \
\hline 4 & \text { Investment } & \text { Decline } & \text { Expand } & & \text { Choice } \
\hline 5 & \mathrm{~W} & 0 & 80 & & \
\hline 6 & \mathrm{X} & \begin{array}{l}
3 \
0 \
\end{array} & 70 & & \
\hline 7 & \mathrm{Y} & \begin{array}{l}
5 \
0 \
\end{array} & 35 & & \
\hline 8 & z & \begin{array}{l}
2 \
0 \
\end{array} & 20 & & \
\hline & \text { Payoffs } & & & & \
\hline
\end{array}$

-Refer to Exhibit 14.9.What decision should be made according to the maximin decision rule?

Accepted Answer

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

Question 17

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 18

In decision-making,luck

Accepted Answer

A) often plays a role in determining whether good or bad outcomes occur 
B) can be quantified 
C) cannot be quantified 
D) can be ignored 
A) often plays a role in determining whether good or bad outcomes occur 
B) can be quantified 
C) cannot be quantified 
D) can be ignored

Question 19

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...

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.What formula should go in cell G15 of the Price worksheet to compute the Consistency Ratio?

Accepted Answer

=AVERAGEG1

Which decision rule pessimistically assumes that nature will always be "against us" regardless of what decision we make?

Although modeling provides valuable insight to decision makers,decision making remains a difficult task.Which of the following is not a primary cause for this difficulty discussed in the Decision Analysis chapter?

The maximin approach to decision-making

Based on the radar chart of raw scores provided below,why is this decision complex?

The expected monetary value criterion EMV)is the decision-making approach used

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 PG|A)and PG|B)never show "Sell A" or "Trade B for D" as selected options?

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

In decision-making,luck

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

Data Mining

Time Series Forecasting

Introduction to Simulation Using Analytic Solver Platform

Queuing Theory

Project Management Online

Filters

Exam 14: Decision Analysis

Which decision rule pessimistically assumes that nature will always be "against us" regardless of what decision we make?

Although modeling provides valuable insight to decision makers,decision making remains a difficult task.Which of the following is not a primary cause for this difficulty discussed in the Decision Analysis chapter?

The maximin approach to decision-making

Based on the radar chart of raw scores provided below,why is this decision complex?

The expected monetary value criterion EMV)is the decision-making approach used

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 PG|A)and PG|B)never show "Sell A" or "Trade B for D" as selected options?

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

In decision-making,luck

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

Data Mining

Time Series Forecasting

Introduction to Simulation Using Analytic Solver Platform

Queuing Theory

Project Management Online

Filters