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##### Saint GBA334 week 2 quiz (in class)

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Question;1.;The decision;theory processes of maximizing expected monetary value (EMV) and;minimizing expected opportunity loss (EOL) should lead us to choose the;same alternatives.;(Points: 4);True False;Question 2.;2.;A utility curve showing utility increasing at an increasing rate as the monetary value increases represents;(Points: 4);a risk avoider.utility assessment.a risk seeker.conditional values.expected utilities.;Question 3.;3.;Any problem that can be presented in a decision table can also be graphically portrayed in a decision tree.;(Points: 4);True False;Question 4.;4.;The optimistic decision criterion is the criterion of ________.;(Points: 4);maximaxmaximinrealismequally likelyminimax regret;Question 5.;5.;To determine the effect of input changes on decision results, we should perform a sensitivity analysis.;(Points: 4);True False;Question 6.;6.;A rational decision;maker must choose between two alternatives. Alternative 1 has a higher;EMV than Alternative 2, but the decision maker chooses Alternative 2.;What might explain why this occurs?;(Points: 4);Alternative 2 may have a higher expected utility.Alternative 1 may have a lower expected opportunity loss.The probabilities are not known.A rational decision maker could not possibly choose alternative 2.None of the above;Question 7.;7.;Consider the following payoff table.;STATE OF;NATURE;ALTERNATIVES;A;B;Alternative 1;100;150;Alternative 2;200;100;Probability;0.4;0.6;The alternative that provides the greatest expected monetary value (EMV) is;(Points: 4);Alternative 1 with EMV of 130Alternative 1 with EMV of 140Alternative 2 with EMV of 130Alternative 2 with EMV of 140None of the above;Question 8.;8.;Nick has plans to open;some pizza restaurants, but he is not sure how many to open. He has;prepared a payoff table to help analyze the situation.;STATE;OF;NATURE;ALTERNATIVES;GOOD MARKET;FAIR MARKET;POOR MARKET;Open 1;380,000;70,000;-400,000;Open 2;200,000;80,000;-200,000;Do Nothing;0;0;0;As;Nick does not know how his product will be received, he assumes that;all three states of nature are equally likely to occur. If he uses the;equally likely criterion, what decision would he make?;(Points: 4);Open 1Open 2Good marketFair marketDo nothing;Question 9.;9.;A pessimistic decision making criterion is;(Points: 4);maximax.equally likely.maximin.decision making under certainty.minimax regret.;Question 10.;10.;Expected monetary value (EMV) is;(Points: 4);the average or expected monetary outcome of a decision if it can be repeated a large number of times.the average or expected value of the decision, if you know what would happen ahead of time.the average or expected value of information if it were completely accurate.the amount you would lose by not picking the best alternative.a decision criterion that places an equal weight on all states of nature.;Question 11.;11.;In decision making under;there are several possible outcomes for each alternative, and;the decision maker does not know the probabilities of the various;outcomes.;(Points: 4);riskutilitycertaintyprobabilityuncertainty;Question 12.;12.;The maximax decision criterion is used by pessimistic decision makers and maximizes the maximum outcome for every alternative.;(Points: 4);True False;Question 13.;13.;The following is an opportunity-loss table.;STATE;OF;NATURE;ALTERNATIVES;A;B;C;Alternative 1;20;100;0;Alternative 2;100;0;25;Alternative 3;0;40;90;The probabilities for the states of;nature A, B, and C are 0.3, 0.5, and 0.2, respectively. If a person;were to use the expected opportunity loss criterion, what decision would;be made?;(Points: 4);Alternative 1Alternative 2Alternative 3State of Nature CState of Nature B;Question 14.;14.;A risk avoider is a person for whom the utility of an outcome;(Points: 4);decreases as the monetary value increases.stays the same as monetary value increases.increases at an increasing rate as the monetary value increases.increases at a decreasing rate as monetary value increases.None of the above;Question 15.;15.;Which of the following is not considered a criteria for decision making under uncertainty?;(Points: 4);optimisticpessimisticequally likelyrandom selectionminimax regret;Question 16.;16.;Consider the following payoff table.;STATE OF;NATURE;ALTERNATIVES;A;B;Alternative 1;100;150;Alternative 2;200;100;Probability;0.4;0.6;How much should be paid for a perfect forecast of the state of nature (EVPI)?;(Points: 4);170301010040;Question 17.;17.;The following is a payoff table giving profits for various situations.;STATE;OF;NATURE;A;B;C;Alternative 1;120;140;120;Alternative 2;200;100;50;Alternative 3;100;120;180;Do Nothing;0;0;0;What decision would a pessimist make?;(Points: 4);Alternative 1Alternative 2Alternative 3Do NothingState of Nature A;Question 18.;18.;An analytic and systematic approach to the study of decision making is referred to as;(Points: 4);decision making under risk.decision making under uncertainty.decision theory.decision analysis.decision making under certainty.;Question 19.;19.;Another name for a decision table is a ________.;(Points: 4);payment tablepayout tablepayoff tablepay-up tabledecision tree;Question 20.;20.;The EMV approach and Utility theory always result in the same choice of alternatives.;(Points: 4);True False;Question 21.;21.;The decision;theory processes of maximizing expected monetary value (EMV) and;minimizing expected opportunity loss (EOL) should lead us to choose the;same alternatives.;(Points: 4);True False;Question 22.;22.;The;difference in decision making under risk and decision making under;uncertainty is that under risk, we think we know the probabilities of;the states of nature, while under uncertainty we do not know the;probabilities of the states of nature.;(Points: 4);True False;Question 23.;23.;The following is a payoff table giving profits for various situations.;STATE;OF;NATURE;A;B;C;Alternative 1;120;140;120;Alternative 2;200;100;50;Alternative 3;100;120;180;Do Nothing;0;0;0;What decision would an optimist make?;(Points: 4);Alternative 1Alternative 2Alternative 3Do NothingState of Nature A;Question 24.;24.;The following is an opportunity loss table.;STATE;OF;NATURE;A;B;C;Alternative 1;30;0;10;Alternative 2;5;20;0;Alternative 3;0;20;25;What decision should be made based on the minimax regret criterion?;(Points: 4);Alternative 1Alternative 2Alternative 3State of Nature CDoes not matter;Question 25.;25.;The several;criteria (maximax, maximin, equally likely, criterion of realism;minimax regret) used for decision making under uncertainty may lead to;the choice of different alternatives.;(Points: 4);True False

Paper#45999 | Written in 18-Jul-2015

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