Question 1

The expected value approach is used for decision-making under risk.

Accepted Answer

A) True 
 B)False

Question 2

-If somehow you find out for certain that state of nature #4 is going to occur, which alternative will you select?

Accepted Answer

The answer of 
-If somehow you find out for certain...

Question 3

The maximin strategy would be:

Accepted Answer

A)  small
B)  Medium
C)  med.-large
D)  large
E)  ex-largeF) B) and D)
G) A) and D)

Question 4

If she uses the Laplace 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 largeF) D) and E)
G) A) and D)

Question 5

If she feels there is a 30% chance that demand will be high, what are the expected monthly profits for the outlet she will decide to lease?

Accepted Answer

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

Question 6

If he uses the Laplace criterion, which size bus will he decide to purchase?

Accepted Answer

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

Question 7

The expected value approach applies to decision-making under uncertainty.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is not an approach for decision-making under uncertainty?

Accepted Answer

A)  decision trees
B)  maximin
C)  maximax
D)  minimax regret
E)  LaplaceF) A) and B)
G) All of the above

Question 9

The term opportunity loss or regret is most closely associated with:

Accepted Answer

A)  minimax regret
B)  maximax
C)  maximin
D)  expected monetary value
E)  LaplaceF) A) and C)
G) A) and D)

Question 10

If she uses the maximin 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 largeF) A) and B)
G) C) and D)

Question 11

The maximin approach involves choosing the alternative with the highest payoff.

Accepted Answer

A) True 
 B)False

Question 12

An advantage of decision trees compared to payoff tables is that they permit us to analyze situations involving sequential decisions.

Accepted Answer

A) True 
 B)False

Question 13

The term sensitivity analysis is most closely associated with:

Accepted Answer

A)  maximax
B)  maximin
C)  decision-making under risk
D)  minimax regret
E)  Laplace criterionF) A) and B)
G) All of the above

Question 14

Expected monetary value gives the long-run average payoff if a large number of identical decisions could be made.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following characterizes decision-making under uncertainty?

Accepted Answer

A)  Decision-makers must rely on probabilities in assessing outcomes.
B)  The likelihood of possible future events is unknown.
C)  Relevant parameters have known values.
D)  Certain parameters have probabilistic outcomes.
E)  none of the aboveF) None of the above
G) C) and E)

Question 16

If she feels that there is a 60% chance that the new cable network will be successful, what is her expected cost (per thousand "hits")  for the strategy she will select?

Accepted Answer

A)  $3.40
B)  $4.60
C)  $8.00
D)  $9.00
E)  $10.00F) None of the above
G) A) and D)

Question 17

What is the expected value of selecting script #2?

Accepted Answer

A)  $15,000,000
B)  $9,060,000
C)  $8,400,000
D)  $7,200,000
E)  $6,000,000F) B) and D)
G) A) and B)

Question 18

If she feels that there is a 60% chance that the new cable network will be successful, what is her expected cost (per thousand "hits")  under certainty?

Accepted Answer

A)  $3.40
B)  $4.60
C)  $8.00
D)  $9.00
E)  $10.00F) A) and E)
G) B) and E)

Question 19

The maximin strategy would be:

Accepted Answer

A)  buy
B)  lease
C)  rent
D)  high
E)  lowF) C) and D)
G) C) and E)

Question 20

If he feels the chances of declining, stable, and growing population trends are 40%, 50%, and 10%, respectively, what is his expected value of perfect information?

Accepted Answer

A)  $187,000
B)  $132,000
C)  $123,000
D)  $65,000
E)  $55,000F) B) and D)
G) A) and E)

Exam 21: Extension 5: Decision Theory

What is the expected value of selecting script #2?

Correct AnswerverifiedShow Answer

The term opportunity loss or regret is most closely associated with:

Correct AnswerverifiedShow Answer

Which of the following is not an approach for decision-making under uncertainty?

Correct AnswerverifiedShow Answer

If he feels the chances of declining, stable, and growing population trends are 40%, 50%, and 10%, respectively, what is his expected value of perfect information?

Correct AnswerverifiedShow Answer

If she feels that there is a 60% chance that the new cable network will be successful, what is her expected cost (per thousand "hits") under certainty?

Correct AnswerverifiedShow Answer

If she feels there is a 30% chance that demand will be high, what are the expected monthly profits for the outlet she will decide to lease?

Correct AnswerverifiedShow Answer

The maximin approach involves choosing the alternative with the highest payoff.

Correct AnswerverifiedShow Answer

Which of the following characterizes decision-making under uncertainty?

Correct AnswerverifiedShow Answer

The maximin strategy would be:

Correct AnswerverifiedShow Answer

If she feels that there is a 60% chance that the new cable network will be successful, what is her expected cost (per thousand "hits") for the strategy she will select?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

-If somehow you find out for certain that state of nature #4 is going to occur, which alternative will you select?

Correct AnswerverifiedShow Answer

The expected value approach is used for decision-making under risk.

Correct AnswerverifiedShow Answer

If he uses the Laplace criterion, which size bus will he decide to purchase?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The expected value approach applies to decision-making under uncertainty.

Correct AnswerverifiedShow Answer

The term sensitivity analysis is most closely associated with:

Correct AnswerverifiedShow Answer

An advantage of decision trees compared to payoff tables is that they permit us to analyze situations involving sequential decisions.

Correct AnswerverifiedShow Answer

The maximin strategy would be:

Correct AnswerverifiedShow Answer

Expected monetary value gives the long-run average payoff if a large number of identical decisions could be made.

Correct AnswerverifiedShow Answer

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