# Quiz 5: Strategic Capacity Planning for Products and Services

Statistics

Q 1Q 1

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

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True False

False

Q 2Q 2

Bounded rationality refers to the limits imposed on decision making because of costs, human abilities, time, technology, and/or availability of information.

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True False

True

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True False

False

Q 4Q 4

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

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True False

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True False

Q 6Q 6

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

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True False

Q 7Q 7

Among decision environments, risk implies that certain parameters have probabilistic outcomes.

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True False

Q 8Q 8

Among decision environments, uncertainty implies that states of nature have wide-ranging probabilities associated with them.

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True False

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True False

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True False

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True False

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True False

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True False

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True False

Q 15Q 15

The term capacity refers to the maximum quantity an operating unit can process over a given period of time.

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True False

Q 16Q 16

Capacity decisions are usually one-time decisions; once they have been made, we know the limits of our operations.

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True False

Q 17Q 17

Stating capacity in dollar amounts generally results in a consistent measure of capacity regardless of the actual units of measure.

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True False

Q 18Q 18

Design capacity refers to the maximum output rate that can be achieved under ideal conditions.

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True False

Q 19Q 19

If the unit cost to buy something is less than the variable cost to make it, the decision to make or buy is based solely on the fixed costs.

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True False

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True False

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True False

Q 22Q 22

Increasing capacity just before a bottleneck operation will improve the output of the process.

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True False

Q 23Q 23

An example of an external factor that influences effective capacity is government safety regulations.

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True False

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True False

Q 25Q 25

Capacity increases are usually acquired in fairly large "chunks" rather than in smooth increments.

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True False

Q 26Q 26

In cost-volume analysis, costs that vary directly with volume of output are referred to as fixed costs because they are a fixed percentage of output levels.

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True False

Q 27Q 27

The break-even quantity can be determined by dividing the fixed costs by the difference between the revenue per unit and the variable cost per unit.

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True False

Q 28Q 28

According to the reading on restaurant sourcing practices, only fast-food restaurants are able to bring in outsourced foods.

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True False

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True False

Q 30Q 30

The current trend toward global operations has made capacity decisions much easier since we have the whole world in which to consider operations.

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True False

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True False

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True False

Q 33Q 33

Capacity decisions often involve a long-term commitment of resources which, when implemented, are difficult or impossible to modify without major added costs.

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True False

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True False

Q 35Q 35

Departmentalizing decisions increases the risk of __________ leading to a poor decision.
A)bounded rationality
B)suboptimization
C)risk aversion
D)misspecification
E)complexification

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Multiple Choice

Q 36Q 36

Suppose a firm has decided to break its departments down into smaller units. While this likely will help with __________ issues, it raises the possibility that poor decisions will result due to __________.
A)risk aversion; suboptimization
B)economies of scale; risk aversion
C)span of control; suboptimization
D)span of control; risk aversion
E)economies of scale; limited span of control

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Multiple Choice

Q 37Q 37

A decision maker's worst option has an expected value of $1,000, and her best option has an expected value of $3,000. With perfect information, the expected value would be $5,000. What is the expected value of perfect information?
A)$5,000
B)$4,000
C)$3,000
D)$2,000
E)$1,000

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Multiple Choice

Q 38Q 38

A decision maker's worst option has an expected value of $1,000, and her best option has an expected value of $3,000. With perfect information, the expected value would be $5,000. The decision maker has discovered a firm that will, for a fee of $1,000, make her position-risk free. How much better off will her firm be if she takes this firm up on its offer?
A)$5,000
B)$4,000
C)$3,000
D)$2,000
E)$1,000

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Multiple Choice

Q 39Q 39

Option A has an expected value of $2,000, a minimum payoff of −$4,000, and a maximum payoff of $18,000. Option B has an expected value of $2,200, a minimum payoff of −$1,000, and a maximum payoff of $6,000. Option C has an expected value of $1,900, a minimum payoff of $100, and a maximum payoff of $2,000. In this situation, a risk-averse decision maker would pay __________ for his risk aversion, and a risk-seeking decision maker would pay __________ for his risk seeking.
A)$200; $300
B)$1,100; $5,000
C)$300; $200
D)$2,100; $16,000
E)$400; $200

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Multiple Choice

Q 40Q 40

The term "suboptimization" is best described as the:
A)result of individual departments making the best decisions for their own areas but hurting other areas.
B)limitations on decision making caused by costs and time.
C)result of failure to adhere to the steps in the decision process.
D)result of ignoring symptoms of the problem.
E)optimization on a micro level that extends to the macro level.

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Multiple Choice

Q 41Q 41

Which phrase best describes the term "bounded rationality"?
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

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Multiple Choice

Q 42Q 42

The range of probability for which an alternative has the best expected payoff can be determined by:
A)simulation.
B)sensitivity analysis.
C)priority recognition.
D)analysis of variance.
E)decision analysis.

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Multiple Choice

Q 43Q 43

Sensitivity analysis is useful because:
A)payoffs and probabilities are estimates.
B)most decisions will affect employees.
C)expected payoffs are sensitive to the time value of money.
D)it is the second step in the decision model.
E)with the passage of time, small decisions get bigger.

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Multiple Choice

Q 44Q 44

A tabular presentation that shows the outcome for each decision alternative under the various possible states of nature is called a:
A)payoff table.
B)feasible region.
C)Laplace table.
D)decision tree.
E)payback period matrix.

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Multiple Choice

Q 45Q 45

Which of the following characterizes decision making under uncertainty?
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)Lack of knowledge about how risk-averse the decision maker is.

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Multiple Choice

Q 46Q 46

Which of the following is not an approach for decision making under uncertainty?
A)decision trees
B)maximin
C)maximax
D)minimax regret
E)Laplace

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Multiple Choice

Q 47Q 47

Determining the worst payoff for each alternative and choosing the alternative with the "best worst" is the approach called:
A)minimin.
B)maximin.
C)maximax.
D)minimax regret.
E)Laplace.

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Multiple Choice

Q 48Q 48

Determining the average payoff for each alternative and choosing the alternative with the highest average is the approach called:
A)minimin.
B)maximin.
C)maximax.
D)minimax regret.
E)Laplace.

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Multiple Choice

Q 49Q 49

The maximin approach to decision making refers to:
A)minimizing the maximum return.
B)maximizing the minimum return.
C)maximizing the minimum expected value.
D)choosing the alternative with the highest payoff.
E)choosing the alternative with the minimum payoff.

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Multiple Choice

Q 50Q 50

Which one of these is not used in decision making under risk?
A)EVPI
B)EMV
C)decision trees
D)minimax regret
E)All are used for risk situations.

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Multiple Choice

Q 51Q 51

The term "opportunity loss" is most closely associated with:
A)minimax regret.
B)maximax.
C)maximin.
D)expected monetary value.
E)Laplace.

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Multiple Choice

Q 52Q 52

The expected monetary value (EMV)criterion is the decision-making approach used with the decision environment of:
A)certainty.
B)risk.
C)uncertainty.
D)aversion.
E)neutrality.

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Multiple Choice

Q 53Q 53

A decision tree is:
A)an algebraic representation of alternatives.
B)a behavioral representation of alternatives.
C)a matrix representation of alternatives.
D)a schematic representation of alternatives.
E)limited to a maximum of 12 branches.

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Multiple Choice

Q 54Q 54

The difference between expected payoff under certainty and expected payoff under risk is the expected:
A)monetary value.
B)value of perfect information.
C)net present value.
D)rate of return.
E)profit.

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Multiple Choice

Q 55Q 55

If the minimum expected regret is computed, it indicates to a decision maker the expected:
A)value of perfect information.
B)payoff under certainty.
C)monetary value.
D)payoff under risk.
E)risk-seeking.

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Multiple Choice

Q 56Q 56

The term "sensitivity analysis" is most closely associated with:
A)maximax.
B)maximin.
C)decision making under risk.
D)minimax regret.
E)Laplace criterion.

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Multiple Choice

Q 57Q 57

Consider the following decision scenario:
*PV for profits ($000)
The maximax strategy would be:
A)buy.
B)lease.
C)rent.
D)high.
E)low.

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Multiple Choice

Q 58Q 58

Consider the following decision scenario:
*PV for profits ($000)
The maximin strategy would be:
A)buy.
B)lease.
C)rent.
D)rent or lease.
E)buy low.

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Multiple Choice

Q 59Q 59

Consider the following decision scenario:
*PV for profits ($000)
The minimax regret strategy would be:
A)buy.
B)lease.
C)rent.
D)high.
E)low.

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Multiple Choice

Q 60Q 60

Consider the following decision scenario:
*PV for profits ($000)
If P(high)is 0.60, the choice for maximum expected value would be:
A)buy.
B)lease.
C)rent.
D)high.
E)low.

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Multiple Choice

Q 61Q 61

Consider the following decision scenario:
*PV for profits ($000)
The maximax strategy would be:
A)small.
B)medium.
C)med.-large.
D)large.
E)ex-large.

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Multiple Choice

Q 62Q 62

Consider the following decision scenario:
*PV for profits ($000)
The maximin strategy would be:
A)small.
B)medium.
C)med.-large.
D)large.
E)ex-large.

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Multiple Choice

Q 63Q 63

Consider the following decision scenario:
*PV for profits ($000)
The maximin strategy would be:
A)small.
B)medium.
C)med.-large.
D)large.
E)ex-large.

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Multiple Choice

Q 64Q 64

Consider the following decision scenario:
*PV for profits ($000)
If yes and no are equally likely, which alternative has the largest expected monetary value?
A)small.
B)medium.
C)med.-large.
D)large.
E)ex-large.

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Multiple Choice

Q 65Q 65

Consider the following decision scenario:
*PV for profits ($000)
The maximax strategy would be:
A)A.
B)B.
C)C.
D)D.
E)E.

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Multiple Choice

Q 66Q 66

Consider the following decision scenario:
*PV for profits ($000)
The maximin strategy would be:
A)A.
B)B.
C)C.
D)D.
E)E.

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Multiple Choice

Q 67Q 67

Consider the following decision scenario:
*PV for profits ($000)
The minimax regret strategy would be:
A)A.
B)B.
C)C.
D)D.
E)E.

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Multiple Choice

Q 68Q 68

Consider the following decision scenario:
*PV for profits ($000)
With equally likely states of nature, the alternative that has the largest expected monetary value is:
A)A.
B)B.
C)C.
D)D.
E)E.

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Multiple Choice

Q 69Q 69

The new owner of a beauty shop is trying to decide whether to hire one, two, or three beauticians. She estimates that profits next year (in thousands of dollars)will vary with demand for her services, and she has estimated demand in three categories, low, medium, and high.
If she uses the maximax criterion, how many beauticians will she decide to hire?
A)one
B)two
C)three
D)either one or two
E)either two or three

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Multiple Choice

Q 70Q 70

The new owner of a beauty shop is trying to decide whether to hire one, two, or three beauticians. She estimates that profits next year (in thousands of dollars)will vary with demand for her services, and she has estimated demand in three categories, low, medium, and high.
If she uses the Laplace criterion, how many beauticians will she decide to hire?
A)one
B)two
C)three
D)either one or two
E)either two or three

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Multiple Choice

Q 71Q 71

The new owner of a beauty shop is trying to decide whether to hire one, two, or three beauticians. She estimates that profits next year (in thousands of dollars)will vary with demand for her services, and she has estimated demand in three categories, low, medium, and high.
If she uses the minimax regret criterion, how many beauticians will she decide to hire?
A)one
B)two
C)three
D)either one or two
E)either two or three

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Multiple Choice

Q 72Q 72

The new owner of a beauty shop is trying to decide whether to hire one, two, or three beauticians. She estimates that profits next year (in thousands of dollars)will vary with demand for her services, and she has estimated demand in three categories, low, medium, and high.
If she feels the chances of low, medium, and high demand are 50 percent, 20 percent, and 30 percent respectively, what are the expected annual profits for the number of beauticians she will decide to hire?
A)$54,000
B)$55,000
C)$70,000
D)$50,000
E)$154,000

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Multiple Choice

Q 73Q 73

The new owner of a beauty shop is trying to decide whether to hire one, two, or three beauticians. She estimates that profits next year (in thousands of dollars)will vary with demand for her services, and she has estimated demand in three categories, low, medium, and high.
If she feels the chances of low, medium, and high demand are 50 percent, 20 percent, and 30 percent respectively, what is her expected value of perfect information?
A)$54,000
B)$65,000
C)$70,000
D)$80,000
E)$135,000

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Multiple Choice

Q 74Q 74

The operations manager for a local bus company wants to decide whether he should purchase a small, medium, or large new bus for his company. He estimates that the annual profits (in $000)will vary depending upon whether passenger demand is low, medium, or high, as follows:
If he uses the maximin criterion, which size bus will he decide to purchase?
A)small
B)medium
C)large
D)either small or medium
E)either medium or large

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Multiple Choice

Q 75Q 75

The operations manager for a local bus company wants to decide whether he should purchase a small, medium, or large new bus for his company. He estimates that the annual profits (in $000)will vary depending upon whether passenger demand is low, medium, or high, as follows:
If he uses the Laplace criterion, which size bus will he decide to purchase?
A)small
B)medium
C)large
D)either small or medium
E)either medium or large

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Multiple Choice

Q 76Q 76

The operations manager for a local bus company wants to decide whether he should purchase a small, medium, or large new bus for his company. He estimates that the annual profits (in $000)will vary depending upon whether passenger demand is low, medium, or high, as follows:
If he uses the minimax regret criterion, which size bus will he decide to purchase?
A)small
B)medium
C)large
D)either small or medium
E)either medium or large

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Multiple Choice

Q 77Q 77

The operations manager for a local bus company wants to decide whether he should purchase a small, medium, or large new bus for his company. He estimates that the annual profits (in $000)will vary depending upon whether passenger demand is low, medium, or high, as follows:
If he feels the chances of low, medium, and high demand are 30 percent, 30 percent, and 40 percent respectively, what is the expected annual profit for the bus that he will decide to purchase?
A)$15,000
B)$61,000
C)$69,000
D)$72,000
E)$87,000

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Multiple Choice

Q 78Q 78

The operations manager for a local bus company wants to decide whether he should purchase a small, medium, or large new bus for his company. He estimates that the annual profits (in $000)will vary depending upon whether passenger demand is low, medium, or high, as follows:
If he feels the chances of low, medium, and high demand are 30 percent, 30 percent, and 40 percent respectively, what is his expected value of perfect information?
A)$15,000
B)$61,000
C)$69,000
D)$72,000
E)$87,000

Free

Multiple Choice

Q 79Q 79

The operations manager for a well-drilling company must recommend whether to build a new facility, expand his existing one, or do nothing. He estimates that long-run profits (in $000)will vary with the amount of precipitation (rainfall)as follows:
If he uses the maximax criterion, which alternative will he decide to select?
A)do nothing
B)expand
C)build new
D)either do nothing or expand
E)either expand or build new

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Multiple Choice

Q 80Q 80

The operations manager for a well-drilling company must recommend whether to build a new facility, expand his existing one, or do nothing. He estimates that long-run profits (in $000)will vary with the amount of precipitation (rainfall)as follows:
If he uses the Laplace criterion, which alternative will he decide to select?
A)do nothing
B)expand
C)build new
D)either do nothing or expand
E)either expand or build new

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Multiple Choice

Q 81Q 81

The operations manager for a well-drilling company must recommend whether to build a new facility, expand his existing one, or do nothing. He estimates that long-run profits (in $000)will vary with the amount of precipitation (rainfall)as follows:
If he uses the minimax regret criterion, which alternative will he decide to select?
A)do nothing
B)expand
C)build new
D)either do nothing or expand
E)either expand or build new

Free

Multiple Choice

Q 82Q 82

The operations manager for a well-drilling company must recommend whether to build a new facility, expand his existing one, or do nothing. He estimates that long-run profits (in $000)will vary with the amount of precipitation (rainfall)as follows:
If he feels the chances of low, normal, and high precipitation are 30 percent, 20 percent, and 50 percent respectively, what are expected long-run profits for the alternative he will select?
A)$140,000
B)$170,000
C)$285,000
D)$305,000
E)$475,000

Free

Multiple Choice

Q 83Q 83

The operations manager for a well-drilling company must recommend whether to build a new facility, expand his existing one, or do nothing. He estimates that long-run profits (in $000)will vary with the amount of precipitation (rainfall)as follows:
If he feels the chances of low, normal, and high precipitation are 30 percent, 20 percent, and 50 percent respectively, what is his expected value of perfect information?
A)$140,000
B)$170,000
C)$285,000
D)$305,000
E)$475,000

Free

Multiple Choice

Q 84Q 84

The local operations manager for the Internal Revenue Service must decide whether to hire one, two, or three temporary tax examiners for the upcoming tax season. She estimates that net revenues (in thousands of dollars)will vary with how well taxpayers comply with the new tax code just passed by Congress, as follows:
If she uses the maximin criterion, how many new examiners will she decide to hire?
A)one
B)two
C)three
D)either one or two
E)either two or three

Free

Multiple Choice

Q 85Q 85

The local operations manager for the Internal Revenue Service must decide whether to hire one, two, or three temporary tax examiners for the upcoming tax season. She estimates that net revenues (in thousands of dollars)will vary with how well taxpayers comply with the new tax code just passed by Congress, as follows:
If she uses the Laplace criterion, how many new examiners will she decide to hire?
A)one
B)two
C)three
D)either one or two
E)either two or three

Free

Multiple Choice

Q 86Q 86

The local operations manager for the Internal Revenue Service must decide whether to hire one, two, or three temporary tax examiners for the upcoming tax season. She estimates that net revenues (in thousands of dollars)will vary with how well taxpayers comply with the new tax code just passed by Congress, as follows:
If she uses the minimax regret criterion, how many new examiners will she decide to hire?
A)one
B)two
C)three
D)either one or two
E)either two or three

Free

Multiple Choice

Q 87Q 87

The local operations manager for the Internal Revenue Service must decide whether to hire one, two, or three temporary tax examiners for the upcoming tax season. She estimates that net revenues (in thousands of dollars)will vary with how well taxpayers comply with the new tax code just passed by Congress, as follows:
If she feels the chances of low, medium, and high compliance are 20 percent, 30 percent, and 50 percent respectively, what are the expected net revenues for the number of assistants she will decide to hire?
A)$26,000
B)$46,000
C)$48,000
D)$50,000
E)$76,000

Free

Multiple Choice

Q 88Q 88

The local operations manager for the Internal Revenue Service must decide whether to hire one, two, or three temporary tax examiners for the upcoming tax season. She estimates that net revenues (in thousands of dollars)will vary with how well taxpayers comply with the new tax code just passed by Congress, as follows:
If she feels the chances of low, medium, and high compliance are 20 percent, 30 percent, and 50 percent respectively, what is her expected value of perfect information?
A)$16,000
B)$26,000
C)$46,000
D)$48,000
E)$50,000

Free

Multiple Choice

Q 89Q 89

The construction manager for Acme Construction, Inc., must decide whether to build single-family homes, apartments, or condominiums. He estimates annual profits (in $000)will vary with the population trend as follows:
If he uses the maximin criterion, which kind of dwellings will he decide to build?
A)single family
B)apartments
C)condominiums
D)either single family or apartments
E)either apartments or condos

Free

Multiple Choice

Q 90Q 90

The construction manager for Acme Construction, Inc., must decide whether to build single-family homes, apartments, or condominiums. He estimates annual profits (in $000)will vary with the population trend as follows:
If he uses the Laplace criterion, which kind of dwellings will he decide to build?
A)single family
B)apartments
C)condos
D)either single family or apartments
E)either apartments or condos

Free

Multiple Choice

Q 91Q 91

The construction manager for Acme Construction, Inc., must decide whether to build single-family homes, apartments, or condominiums. He estimates annual profits (in $000)will vary with the population trend as follows:
If he uses the minimax regret criterion, which kind of dwellings will he decide to build?
A)single family
B)apartments
C)condos
D)either single family or apartments
E)either apartments or condos

Free

Multiple Choice

Q 92Q 92

The construction manager for Acme Construction, Inc., must decide whether to build single-family homes, apartments, or condominiums. He estimates annual profits (in $000)will vary with the population trend as follows:
If he feels the chances of declining, stable, and growing population trends are 40 percent, 50 percent, and 10 percent, respectively, which kind of houses will he decide to build?
A)single family
B)apartments
C)condos
D)either single family or apartments
E)either apartments or condos

Free

Multiple Choice

Q 93Q 93

The construction manager for Acme Construction, Inc., must decide whether to build single-family homes, apartments, or condominiums. He estimates annual profits (in $000)will vary with the population trend as follows:
If he feels the chances of declining, stable, and growing population trends are 40 percent, 50 percent, and 10 percent, respectively, what is his expected value of perfect information?
A)$187,000
B)$132,000
C)$122,000
D)$64,000
E)$55,000

Free

Multiple Choice

Q 94Q 94

The owner of Tastee Cookies needs to decide whether to lease a small, medium, or large new retail outlet. She estimates that monthly profits will vary with demand for her cookies as follows:
If she uses the maximax criterion, what size outlet will she decide to lease?
A)small
B)medium
C)large
D)either small or medium
E)either medium or large

Free

Multiple Choice

Q 95Q 95

The owner of Tastee Cookies needs to decide whether to lease a small, medium, or large new retail outlet. She estimates that monthly profits will vary with demand for her cookies as follows:
If she uses the maximin criterion, what size outlet will she decide to lease?
A)small
B)medium
C)large
D)either small or medium
E)either medium or large

Free

Multiple Choice

Q 96Q 96

The owner of Tastee Cookies needs to decide whether to lease a small, medium, or large new retail outlet. She estimates that monthly profits will vary with demand for her cookies as follows:
If she uses the Laplace criterion, what size outlet will she decide to lease?
A)small
B)medium
C)large
D)either small or medium
E)either medium or large

Free

Multiple Choice

Q 97Q 97

The owner of Tastee Cookies needs to decide whether to lease a small, medium, or large new retail outlet. She estimates that monthly profits will vary with demand for her cookies as follows:
If she uses the minimax regret criterion, what size outlet will she decide to lease?
A)small
B)medium
C)large
D)either small or medium
E)either medium or large

Free

Multiple Choice

Q 98Q 98

The owner of Tastee Cookies needs to decide whether to lease a small, medium, or large new retail outlet. She estimates that monthly profits will vary with demand for her cookies as follows:
If she feels there is a 30 percent chance that demand will be high, what are the expected monthly profits for the outlet she will decide to lease?
A)$1,600
B)$1,100
C)$1,000
D)$900
E)$500

Free

Multiple Choice

Q 99Q 99

The owner of Tastee Cookies needs to decide whether to lease a small, medium, or large new retail outlet. She estimates that monthly profits will vary with demand for her cookies as follows:
If she feels there is a 30 percent chance that demand will be high, what is her expected payoff under certainty?
A)$1,600
B)$1,100
C)$1,000
D)$900
E)$500

Free

Multiple Choice

Q 100Q 100

The owner of Tastee Cookies needs to decide whether to lease a small, medium, or large new retail outlet. She estimates that monthly profits will vary with demand for her cookies as follows:
If she feels there is a 30 percent chance that demand will be high, what is her expected value of perfect information?
A)$1,600
B)$1,100
C)$1,000
D)$900
E)$500

Free

Multiple Choice

Q 101Q 101

The owner of Tastee Cookies needs to decide whether to lease a small, medium, or large new retail outlet. She estimates that monthly profits will vary with demand for her cookies as follows:
For what range of probability that demand will be high, will she decide to lease the small facility?
A)0-0.25
B)0-0.33
C)0.25-0.5
D)0.33-1
E)0.5-1

Free

Multiple Choice

Q 102Q 102

The owner of Tastee Cookies needs to decide whether to lease a small, medium, or large new retail outlet. She estimates that monthly profits will vary with demand for her cookies as follows:
For what range of probability that demand will be high, will she decide to lease the medium facility?
A)0-0.25
B)0-0.33
C)0.25-0.5
D)0.33-1
E)0.5-1

Free

Multiple Choice

Q 103Q 103

The owner of Tastee Cookies needs to decide whether to lease a small, medium, or large new retail outlet. She estimates that monthly profits will vary with demand for her cookies as follows:
For what range of probability that demand will be high, will she decide to lease the large facility?
A)0-0.25
B)0-0.33
C)0.25-0.5
D)0.33-1
E)0.5-1

Free

Multiple Choice

Q 104Q 104

The advertising manager for Roadside Restaurants, Inc., needs to decide whether to spend this month's budget for advertising on print media, television, or a mixture of the two. She estimates that the cost per thousand "hits" (readers or viewers)will vary depending upon the success of the new cable television network she plans to use, as follows:
If she uses the maximax criterion, which advertising strategy will she use?
A)print
B)mixed
C)television
D)either print or mixed
E)either mixed or television

Free

Multiple Choice

Q 105Q 105

The advertising manager for Roadside Restaurants, Inc., needs to decide whether to spend this month's budget for advertising on print media, television, or a mixture of the two. She estimates that the cost per thousand "hits" (readers or viewers)will vary depending upon the success of the new cable television network she plans to use, as follows:
If she uses the maximin criterion, which advertising strategy will she use?
A)print
B)mixed
C)television
D)either print or mixed
E)either mixed or television

Free

Multiple Choice

Q 106Q 106

The advertising manager for Roadside Restaurants, Inc., needs to decide whether to spend this month's budget for advertising on print media, television, or a mixture of the two. She estimates that the cost per thousand "hits" (readers or viewers)will vary depending upon the success of the new cable television network she plans to use, as follows:
If she uses the Laplace criterion, which advertising strategy will she use?
A)print
B)mixed
C)television
D)either print or mixed
E)either mixed or television

Free

Multiple Choice

Q 107Q 107

The advertising manager for Roadside Restaurants, Inc., needs to decide whether to spend this month's budget for advertising on print media, television, or a mixture of the two. She estimates that the cost per thousand "hits" (readers or viewers)will vary depending upon the success of the new cable television network she plans to use, as follows:
If she uses the minimax regret criterion, which advertising strategy will she use?
A)print
B)mixed
C)television
D)either print or mixed
E)either mixed or television

Free

Multiple Choice

Q 108Q 108

The advertising manager for Roadside Restaurants, Inc., needs to decide whether to spend this month's budget for advertising on print media, television, or a mixture of the two. She estimates that the cost per thousand "hits" (readers or viewers)will vary depending upon the success of the new cable television network she plans to use, as follows:
If she feels that there is a 60 percent chance that the new cable network will be successful, what is her expected cost (per thousand "hits")for the strategy she will select?
A)$3.40
B)$4.60
C)$8.00
D)$9.00
E)$10.00

Free

Multiple Choice

Q 109Q 109

The advertising manager for Roadside Restaurants, Inc., needs to decide whether to spend this month's budget for advertising on print media, television, or a mixture of the two. She estimates that the cost per thousand "hits" (readers or viewers)will vary depending upon the success of the new cable television network she plans to use, as follows:
If she feels that there is a 60 percent chance that the new cable network will be successful, what is her expected cost (per thousand "hits")under certainty?
A)$3.40
B)$4.60
C)$8.00
D)$9.00
E)$10.00

Free

Multiple Choice

Q 110Q 110

The advertising manager for Roadside Restaurants, Inc., needs to decide whether to spend this month's budget for advertising on print media, television, or a mixture of the two. She estimates that the cost per thousand "hits" (readers or viewers)will vary depending upon the success of the new cable television network she plans to use, as follows:
If she feels that there is a 60 percent chance that the new cable network will be successful, what is her expected value (per thousand "hits")of perfect information?
A)$3.40
B)$4.60
C)$8.00
D)$9.00
E)$10.00

Free

Multiple Choice

Q 111Q 111

The advertising manager for Roadside Restaurants, Inc., needs to decide whether to spend this month's budget for advertising on print media, television, or a mixture of the two. She estimates that the cost per thousand "hits" (readers or viewers)will vary depending upon the success of the new cable television network she plans to use, as follows:
For what range of probability that the new cable network will be successful will she select the print media strategy?
A)0-0.4
B)0-0.55
C)0.4-0.7
D)0.55-1
E)0.7-1

Free

Multiple Choice

Q 112Q 112

The advertising manager for Roadside Restaurants, Inc., needs to decide whether to spend this month's budget for advertising on print media, television, or a mixture of the two. She estimates that the cost per thousand "hits" (readers or viewers)will vary depending upon the success of the new cable television network she plans to use, as follows:
For what range of probability that the new cable network will be successful will she select the mixed media strategy?
A)0-0.4
B)0-0.55
C)0.4-0.7
D)0.55-1
E)0.7-1

Free

Multiple Choice

Q 113Q 113

The advertising manager for Roadside Restaurants, Inc., needs to decide whether to spend this month's budget for advertising on print media, television, or a mixture of the two. She estimates that the cost per thousand "hits" (readers or viewers)will vary depending upon the success of the new cable television network she plans to use, as follows:
For what range of probability that the new cable network will be successful will she select the television media strategy?
A)0-0.4
B)0-0.55
C)0.4-0.7
D)0.55-1
E)0.7-1

Free

Multiple Choice

Q 114Q 114

The head of operations for a movie studio wants to determine which of two new scripts they should select for their next major production. (Due to budgeting constraints, only one new picture can be undertaken at this time.)She feels that script 1 has a 70 percent chance of earning about $10,000,000 over the long run, but a 30 percent chance of losing $2,000,000. If this movie is successful, then a sequel could also be produced, with an 80 percent chance of earning $5,000,000, but a 20 percent chance of losing $1,000,000. On the other hand, she feels that script 2 has a 60 percent chance of earning $12,000,000, but a 40 percent chance of losing $3,000,000. If successful, its sequel would have a 50 percent chance of earning $8,000,000, but a 50 percent chance of losing $4,000,000. Of course, in either case, if the original movie were a flop, then no sequel would be produced.
What would be the total payoff if script 1 were a success, but its sequel were not?
A)$15,000,000
B)$10,000,000
C)$9,000,000
D)$5,000,000
E)$−1,000,000

Free

Multiple Choice

Q 115Q 115

The head of operations for a movie studio wants to determine which of two new scripts they should select for their next major production. (Due to budgeting constraints, only one new picture can be undertaken at this time.)She feels that script 1 has a 70 percent chance of earning about $10,000,000 over the long run, but a 30 percent chance of losing $2,000,000. If this movie is successful, then a sequel could also be produced, with an 80 percent chance of earning $5,000,000, but a 20 percent chance of losing $1,000,000. On the other hand, she feels that script 2 has a 60 percent chance of earning $12,000,000, but a 40 percent chance of losing $3,000,000. If successful, its sequel would have a 50 percent chance of earning $8,000,000, but a 50 percent chance of losing $4,000,000. Of course, in either case, if the original movie were a flop, then no sequel would be produced.
What is the probability that script 1 will be a success, but its sequel will not?
A)0.8
B)0.7
C)0.56
D)0.2
E)0.14

Free

Multiple Choice

Q 116Q 116

The head of operations for a movie studio wants to determine which of two new scripts they should select for their next major production. (Due to budgeting constraints, only one new picture can be undertaken at this time.)She feels that script 1 has a 70 percent chance of earning about $10,000,000 over the long run, but a 30 percent chance of losing $2,000,000. If this movie is successful, then a sequel could also be produced, with an 80 percent chance of earning $5,000,000, but a 20 percent chance of losing $1,000,000. On the other hand, she feels that script 2 has a 60 percent chance of earning $12,000,000, but a 40 percent chance of losing $3,000,000. If successful, its sequel would have a 50 percent chance of earning $8,000,000, but a 50 percent chance of losing $4,000,000. Of course, in either case, if the original movie were a flop, then no sequel would be produced.
What is the expected value of selecting script 1?
A)$15,000,000
B)$9,060,000
C)$8,400,000
D)$7,200,000
E)$6,000,000

Free

Multiple Choice

Q 117Q 117

The head of operations for a movie studio wants to determine which of two new scripts they should select for their next major production. (Due to budgeting constraints, only one new picture can be undertaken at this time.)She feels that script 1 has a 70 percent chance of earning about $10,000,000 over the long run, but a 30 percent chance of losing $2,000,000. If this movie is successful, then a sequel could also be produced, with an 80 percent chance of earning $5,000,000, but a 20 percent chance of losing $1,000,000. On the other hand, she feels that script 2 has a 60 percent chance of earning $12,000,000, but a 40 percent chance of losing $3,000,000. If successful, its sequel would have a 50 percent chance of earning $8,000,000, but a 50 percent chance of losing $4,000,000. Of course, in either case, if the original movie were a flop, then no sequel would be produced.
What is the expected value of selecting script 2?
A)$15,000,000
B)$9,060,000
C)$8,400,000
D)$7,200,000
E)$6,000,000

Free

Multiple Choice

Q 118Q 118

The head of operations for a movie studio wants to determine which of two new scripts they should select for their next major production. (Due to budgeting constraints, only one new picture can be undertaken at this time.)She feels that script 1 has a 70 percent chance of earning about $10,000,000 over the long run, but a 30 percent chance of losing $2,000,000. If this movie is successful, then a sequel could also be produced, with an 80 percent chance of earning $5,000,000, but a 20 percent chance of losing $1,000,000. On the other hand, she feels that script 2 has a 60 percent chance of earning $12,000,000, but a 40 percent chance of losing $3,000,000. If successful, its sequel would have a 50 percent chance of earning $8,000,000, but a 50 percent chance of losing $4,000,000. Of course, in either case, if the original movie were a flop, then no sequel would be produced.
What is the expected value for the optimum decision alternative?
A)$15,000,000
B)$9,060,000
C)$8,400,000
D)$7,200,000
E)$6,000,000

Free

Multiple Choice

Q 119Q 119

One local hospital has just enough space and funds currently available to start either a cancer or heart research lab. If administration decides on the cancer lab, there is a 20 percent chance of getting $100,000 in outside funding from the American Cancer Society next year, and an 80 percent chance of getting nothing. If the cancer research lab is funded the first year, no additional outside funding will be available the second year. However, if it is not funded the first year, then management estimates the chances are 50 percent it will get $100,000 the following year, and 50 percent that it will get nothing again. If, however, the hospital's management decides to go with the heart lab, then there is a 50 percent chance of getting $50,000 in outside funding from the American Heart Association the first year and a 50 percent chance of getting nothing. If the heart lab is funded the first year, management estimates a 40 percent chance of getting another $50,000 and a 60 percent chance of getting nothing additional the second year. If it is not funded the first year, then management estimates a 60 percent chance for getting $50,000 and a 40 percent chance for getting nothing in the following year. For both the cancer and heart research labs, no further possible funding is anticipated beyond the first two years.
What would be the total payoff if the heart lab were funded in both the first and second years?
A)$100,000
B)$60,000
C)$50,000
D)$40,000
E)$20,000

Free

Multiple Choice

Q 120Q 120

One local hospital has just enough space and funds currently available to start either a cancer or heart research lab. If administration decides on the cancer lab, there is a 20 percent chance of getting $100,000 in outside funding from the American Cancer Society next year, and an 80 percent chance of getting nothing. If the cancer research lab is funded the first year, no additional outside funding will be available the second year. However, if it is not funded the first year, then management estimates the chances are 50 percent it will get $100,000 the following year, and 50 percent that it will get nothing again. If, however, the hospital's management decides to go with the heart lab, then there is a 50 percent chance of getting $50,000 in outside funding from the American Heart Association the first year and a 50 percent chance of getting nothing. If the heart lab is funded the first year, management estimates a 40 percent chance of getting another $50,000 and a 60 percent chance of getting nothing additional the second year. If it is not funded the first year, then management estimates a 60 percent chance for getting $50,000 and a 40 percent chance for getting nothing in the following year. For both the cancer and heart research labs, no further possible funding is anticipated beyond the first two years.
What is the probability that the heart lab will be funded in both the first and second years?
A)0.4
B)0.3
C)0.2
D)0.1
E)0

Free

Multiple Choice

Q 121Q 121

One local hospital has just enough space and funds currently available to start either a cancer or heart research lab. If administration decides on the cancer lab, there is a 20 percent chance of getting $100,000 in outside funding from the American Cancer Society next year, and an 80 percent chance of getting nothing. If the cancer research lab is funded the first year, no additional outside funding will be available the second year. However, if it is not funded the first year, then management estimates the chances are 50 percent it will get $100,000 the following year, and 50 percent that it will get nothing again. If, however, the hospital's management decides to go with the heart lab, then there is a 50 percent chance of getting $50,000 in outside funding from the American Heart Association the first year and a 50 percent chance of getting nothing. If the heart lab is funded the first year, management estimates a 40 percent chance of getting another $50,000 and a 60 percent chance of getting nothing additional the second year. If it is not funded the first year, then management estimates a 60 percent chance for getting $50,000 and a 40 percent chance for getting nothing in the following year. For both the cancer and heart research labs, no further possible funding is anticipated beyond the first two years.
What is the expected value for the decision alternative to select the cancer lab?
A)$100,000
B)$60,000
C)$50,000
D)$40,000
E)$20,000

Free

Multiple Choice

Q 122Q 122

One local hospital has just enough space and funds currently available to start either a cancer or heart research lab. If administration decides on the cancer lab, there is a 20 percent chance of getting $100,000 in outside funding from the American Cancer Society next year, and an 80 percent chance of getting nothing. If the cancer research lab is funded the first year, no additional outside funding will be available the second year. However, if it is not funded the first year, then management estimates the chances are 50 percent it will get $100,000 the following year, and 50 percent that it will get nothing again. If, however, the hospital's management decides to go with the heart lab, then there is a 50 percent chance of getting $50,000 in outside funding from the American Heart Association the first year and a 50 percent chance of getting nothing. If the heart lab is funded the first year, management estimates a 40 percent chance of getting another $50,000 and a 60 percent chance of getting nothing additional the second year. If it is not funded the first year, then management estimates a 60 percent chance for getting $50,000 and a 40 percent chance for getting nothing in the following year. For both the cancer and heart research labs, no further possible funding is anticipated beyond the first two years.
What is the expected value for the decision alternative to select the heart lab?
A)$100,000
B)$60,000
C)$50,000
D)$40,000
E)$20,000

Free

Multiple Choice

Q 123Q 123

One local hospital has just enough space and funds currently available to start either a cancer or heart research lab. If administration decides on the cancer lab, there is a 20 percent chance of getting $100,000 in outside funding from the American Cancer Society next year, and an 80 percent chance of getting nothing. If the cancer research lab is funded the first year, no additional outside funding will be available the second year. However, if it is not funded the first year, then management estimates the chances are 50 percent it will get $100,000 the following year, and 50 percent that it will get nothing again. If, however, the hospital's management decides to go with the heart lab, then there is a 50 percent chance of getting $50,000 in outside funding from the American Heart Association the first year and a 50 percent chance of getting nothing. If the heart lab is funded the first year, management estimates a 40 percent chance of getting another $50,000 and a 60 percent chance of getting nothing additional the second year. If it is not funded the first year, then management estimates a 60 percent chance for getting $50,000 and a 40 percent chance for getting nothing in the following year. For both the cancer and heart research labs, no further possible funding is anticipated beyond the first two years.
What is the expected value for the optimum decision alternative?
A)$100,000
B)$60,000
C)$50,000
D)$40,000
E)$20,000

Free

Multiple Choice

Q 124Q 124

Two professors at a nearby university want to coauthor a new textbook in either economics or statistics. They feel that if they write an economics book, they have a 50 percent chance of placing it with a major publisher, and it should ultimately sell about 40,000 copies. If they cannot get a major publisher to take it, then they feel they have an 80 percent chance of placing it with a smaller publisher, with ultimate sales of 30,000 copies. On the other hand, if they write a statistics book, they feel they have a 40 percent chance of placing it with a major publisher, and it should result in ultimate sales of about 50,000 copies. If they cannot get a major publisher to take it, they feel they have a 50 percent chance of placing it with a smaller publisher, with ultimate sales of 35,000 copies.
What is the probability that the economics book would wind up being placed with a smaller publisher?
A)0.8
B)0.5
C)0.4
D)0.2
E)0.1

Free

Multiple Choice

Q 125Q 125

Two professors at a nearby university want to coauthor a new textbook in either economics or statistics. They feel that if they write an economics book, they have a 50 percent chance of placing it with a major publisher, and it should ultimately sell about 40,000 copies. If they cannot get a major publisher to take it, then they feel they have an 80 percent chance of placing it with a smaller publisher, with ultimate sales of 30,000 copies. On the other hand, if they write a statistics book, they feel they have a 40 percent chance of placing it with a major publisher, and it should result in ultimate sales of about 50,000 copies. If they cannot get a major publisher to take it, they feel they have a 50 percent chance of placing it with a smaller publisher, with ultimate sales of 35,000 copies.
What is the probability that the statistics book would wind up being placed with a smaller publisher?
A)0.6
B)0.5
C)0.4
D)0.3
E)0

Free

Multiple Choice

Q 126Q 126

Two professors at a nearby university want to coauthor a new textbook in either economics or statistics. They feel that if they write an economics book, they have a 50 percent chance of placing it with a major publisher, and it should ultimately sell about 40,000 copies. If they cannot get a major publisher to take it, then they feel they have an 80 percent chance of placing it with a smaller publisher, with ultimate sales of 30,000 copies. On the other hand, if they write a statistics book, they feel they have a 40 percent chance of placing it with a major publisher, and it should result in ultimate sales of about 50,000 copies. If they cannot get a major publisher to take it, they feel they have a 50 percent chance of placing it with a smaller publisher, with ultimate sales of 35,000 copies.
What is the expected value for the decision alternative to write the economics book?
A)50,000 copies
B)40,000 copies
C)32,000 copies
D)30,500 copies
E)10,500 copies

Free

Multiple Choice

Q 127Q 127

Two professors at a nearby university want to coauthor a new textbook in either economics or statistics. They feel that if they write an economics book, they have a 50 percent chance of placing it with a major publisher, and it should ultimately sell about 40,000 copies. If they cannot get a major publisher to take it, then they feel they have an 80 percent chance of placing it with a smaller publisher, with ultimate sales of 30,000 copies. On the other hand, if they write a statistics book, they feel they have a 40 percent chance of placing it with a major publisher, and it should result in ultimate sales of about 50,000 copies. If they cannot get a major publisher to take it, they feel they have a 50 percent chance of placing it with a smaller publisher, with ultimate sales of 35,000 copies.
What is the expected value for the decision alternative to write the statistics book?
A)50,000 copies
B)40,000 copies
C)32,000 copies
D)30,500 copies
E)10,500 copies

Free

Multiple Choice

Q 128Q 128

Two professors at a nearby university want to coauthor a new textbook in either economics or statistics. They feel that if they write an economics book, they have a 50 percent chance of placing it with a major publisher, and it should ultimately sell about 40,000 copies. If they cannot get a major publisher to take it, then they feel they have an 80 percent chance of placing it with a smaller publisher, with ultimate sales of 30,000 copies. On the other hand, if they write a statistics book, they feel they have a 40 percent chance of placing it with a major publisher, and it should result in ultimate sales of about 50,000 copies. If they cannot get a major publisher to take it, they feel they have a 50 percent chance of placing it with a smaller publisher, with ultimate sales of 35,000 copies.
What is the expected value for the optimum decision alternative?
A)50,000 copies
B)40,000 copies
C)32,000 copies
D)30,500 copies
E)10,500 copies

Free

Multiple Choice

Q 129Q 129

When a decision-making scenario involves two or more departments, if the individual departments pursue what is optimal for them, sometimes the overall organization suffers. This is an example of:
A)subminimization.
B)suboptimization.
C)rational boundaries.
D)decision making under risk.
E)decision making under uncertainty.

Free

Multiple Choice

Q 130Q 130

Which of the following is not a stage in the decision-making process?
A)Select the best alternative.
B)Develop suitable alternatives.
C)Analyze and compare alternatives.
D)Monitor the competition.
E)Specify objectives.

Free

Multiple Choice

Q 131Q 131

Option A has a payoff of $10,000 in environment 1 and $20,000 in environment 2. Option B has a payoff of $5,000 in environment 1 and $27,500 in environment 2. Once the probability of environment 1 exceeds ______, option A becomes the better choice.
A)0.40
B)0.45
C)0.50
D)0.57
E)0.60

Free

Multiple Choice

Q 132Q 132

Option A has a payoff of $10,000 in environment 1 and $20,000 in environment 2. Option B has a payoff of $12,500 in environment 1 and $17,500 in environment 2. Once the probability of environment 2 exceeds ______, option A becomes the better choice.
A)0.33
B)0.67
C)0.45
D)0.50
E)0.55

Free

Multiple Choice

Q 133Q 133

Which of the following would make decision trees an especially attractive decision-making tool?
A)The need to think through a possible sequence of decisions.
B)The need to maximize the expected value of perfect information.
C)The need to minimize expected regret.
D)The need to avoid suboptimization.
E)The need to minimize costs for a single decision

Free

Multiple Choice

Q 134Q 134

Risk implies that there are certain parameters that have _____ outcomes.
A)probabilistic
B)complex
C)unknown
D)uncertain
E)irrational

Free

Multiple Choice

Q 135Q 135

A decision making involving certainty about potential future conditions will have a relatively _____ decision.
A)uncertain
B)straightforward
C)unknown
D)probabilistic
E)irrational

Free

Multiple Choice

Q 136Q 136

The dean of a college wants to determine which of two new classes to offer for the upcoming semester. Due to facility constraints only one class can be offered at this time. The dean feels that the first class has an 80 percent chance of earning the college about $75,000, but a 20 percent chance of losing $35,000. If the class is successful, then its next level class will be offered, with a 75 percent chance of earning $60,000, but a 20 percent chance of losing $30,000. Weighing the options, the dean feels that the second class has a 60 percent chance of earning $85,000, but a 40 percent chance of losing $40,000. If the second class is successful, then its next level class will be offered with a 50 percent chance of earning $80,000, but a 50 percent chance of losing $45,000. If both classes are not successful, neither of their next level classes will be offered to the students.What is the expected value for selecting the first class?
A)$90,000
B)$83,000
C)$75,500
D)$50,000
E)$45,500

Free

Multiple Choice

Q 137Q 137

The dean of a college wants to determine which of two new classes to offer for the upcoming semester. Due to facility constraints only one class can be offered at this time. The dean feels that the first class has an 80 percent chance of earning the college about $75,000, but a 20 percent chance of losing $35,000. If the class is successful, then its next level class will be offered, with a 75 percent chance of earning $60,000, but a 25 percent chance of losing $30,000. Weighing the options, the dean feels that the second class has a 60 percent chance of earning $85,000, but a 40 percent chance of losing $40,000. If the second class is successful, then its next level class will be offered with a 50 percent chance of earning $80,000, but a 50 percent chance of losing $45,000. If both classes are not successful, neither of their next level classes will be offered to the students.What is the expected value for selecting the second class?
A)$90,000
B)$83,000
C)$75,500
D)$50,000
E)$45,500

Free

Multiple Choice

Q 138Q 138

The dean of a college wants to determine which of two new classes to offer for the upcoming semester. Due to facility constraints only one class can be offered at this time. The dean feels that the first class has an 80 percent chance of earning the college about $75,000, but a 20 percent chance of losing $35,000. If the class is successful, then its next level class will be offered, with a 75 percent chance of earning $60,000, but a 25 percent chance of losing $30,000. Weighing the options, the dean feels that the second class has a 60 percent chance of earning $85,000, but a 40 percent chance of losing $40,000. If the second class is successful, then its next level class will be offered with a 50 percent chance of earning $80,000, but a 50 percent chance of losing $45,000. If both classes are not successful, neither of their next level classes will be offered to the students.What is the expect value for the optimum decision alternative?
A)$90,000
B)$83,000
C)$75,500
D)$50,000
E)$45,500

Free

Multiple Choice

Q 139Q 139

A decision maker's worst option has an expected value of $2,550, and the decision maker's best option has an expected value of $4,750. With perfect information, the expected value would be $6,000. What is the expected value of perfect information?
A)$2,200
B)$4,250
C)$3,450
D)$1,250
E)$650

Free

Multiple Choice

Q 140Q 140

A decision maker's worst option has an expected value of $2,550, and the decision maker's best option has an expected value of $4,750. With perfect information, the expected value would be $6,000. The decision maker has received an offer from a banking firm that will make their position risk-free for a fee of $600. How much better off will the decision maker be if they take the offer?
A)$2,200
B)$4,250
C)$3,450
D)$1,250
E)$650

Free

Multiple Choice

Q 141Q 141

Outsourcing some production is a means of _________ a capacity constraint.
A)identifying
B)modifying
C)supporting
D)overcoming
E)repeating

Free

Multiple Choice

Q 142Q 142

Which of the following is a key question in capacity planning?
A)Should we make the product in-house or outsource it?
B)Where do we need the capacity?
C)When do we need the capacity?
D)Who will pay for the capacity change?
E)Should we change capacity all at once, or through several small changes?

Free

Multiple Choice

Q 143Q 143

Allowances for which of these factors would be subtracted from design capacity when calculating effective capacity?
A)personal time
B)equipment maintenance
C)scheduling problems
D)changing the mix of products
E)All of these choices are correct

Free

Multiple Choice

Q 144Q 144

Which of the following is not a reason why capacity decisions are so important?
A)Capacity limits the rate of output possible.
B)Capacity affects operating costs.
C)Capacity is a major determinant of initial costs.
D)Capacity is a long-term commitment of resources.
E)Capacity chunks can be added or deleted quickly and inexpensively.

Free

Multiple Choice

Q 145Q 145

Which of the following is the case where capacity is measured in terms of inputs?
A)tons of steel per day that can be produced by a steel mill
B)kilowatt hours per day that can be generated by an electrical power plant
C)number of meals per day that can be served by a restaurant
D)gallons of gasoline that can be produced per day by a petroleum refinery
E)number of passenger seats that can be filled per day on an airline route

Free

Multiple Choice

Q 146Q 146

Unbalanced systems are evidenced by:
A)top-heavy operations.
B)labor unrest.
C)bottleneck operations.
D)increasing capacities.
E)assembly lines.

Free

Multiple Choice

Q 147Q 147

Maximum capacity commonly refers to the upper limit on:
A)utilization.
B)the rate of demand.
C)efficiency.
D)the rate of output.
E)finances.

Free

Multiple Choice

Q 148Q 148

The impact that a significant change in capacity will have on a key vendor is a:
A)supply chain factor.
B)process limiting factor.
C)internal factor.
D)human resource factor.
E)operational process factor.

Free

Multiple Choice

Q 149Q 149

The maximum possible output given a product mix, scheduling difficulties, personal time, and so on is:
A)utilization.
B)design capacity.
C)efficiency.
D)effective capacity.
E)available capacity.

Free

Multiple Choice

Q 150Q 150

Efficiency is defined as the ratio of:
A)actual output to effective capacity.
B)actual output to design capacity.
C)design capacity to effective capacity.
D)effective capacity to actual output.
E)design capacity to actual output.

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Multiple Choice

Q 151Q 151

Utilization is defined as the ratio of:
A)actual output to effective capacity.
B)actual output to design capacity.
C)design capacity to effective capacity.
D)effective capacity to actual output.
E)design capacity to actual output.

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Multiple Choice

Q 152Q 152

Which of the following would tend to reduce effective capacity?
A)suppliers that provide more reliable delivery performance
B)reduced changeover times
C)employees that are fully trained
D)improved production quality
E)greater variety in the product line

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Multiple Choice

Q 153Q 153

The decision to outsource opens the firm up to certain risks, among them _________ and ________.
A)lower costs; fewer task-specific investments
B)loss of direct control over operations; need to disclose proprietary information
C)access to greater expertise; greater demand variability
D)greater capacity rigidity; tight knowledge control
E)higher marketing costs; small orders

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Multiple Choice

Q 154Q 154

The ratio of actual output to effective capacity is:
A)design capacity.
B)effective capacity.
C)actual capacity.
D)efficiency.
E)utilization.

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Multiple Choice

Q 155Q 155

The ratio of actual output to design capacity is:
A)design capacity.
B)effective capacity.
C)actual capacity.
D)efficiency.
E)utilization.

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Multiple Choice

Q 156Q 156

Given the following information, what would efficiency be?
Effective capacity = 80 units per day
Design capacity = 100 units per day
Utilization = 48 percent
A)20 percent
B)35 percent
C)48 percent
D)60 percent
E)80 percent

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Multiple Choice

Q 157Q 157

Given the following information, what would efficiency be?
Effective capacity = 50 units per day
Design capacity = 100 units per day
Actual output = 30 units per day
A)40 percent
B)50 percent
C)60 percent
D)80 percent
E)90 percent

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Multiple Choice

Q 158Q 158

Given the following information, what would utilization be?
Effective capacity = 20 units per day
Design capacity = 60 units per day
Actual output = 15 units per day
A)25%
B)33%
C)50%
D)75%
E)none of these

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Multiple Choice

Q 159Q 159

Which of the following is not a strategy to manage service capacity or cope with service capacity limitations?
A)hiring extra workers
B)storing inventories of the service
C)pricing and promotion
D)part-time workers
E)subcontracting

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Multiple Choice

Q 160Q 160

Which of the following is not a determinant of effective capacity?
A)facilities
B)product mix
C)actual output
D)human factors
E)external factors

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Multiple Choice

Q 161Q 161

Everything else being equal, a firm considering outsourcing would find all of the following desirable except:
A)total costs will be lower for outsources goods or services.
B)its supplier has more expertise in whatever is being outsourced.
C)it can maintain tight control over knowledge.
D)proprietary information will be disclosed to the supplier.
E)control over operations will be maintained by the firm.

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Multiple Choice

Q 162Q 162

Capacity in excess of expected demand that is intended to offset uncertainty is a:
A)margin protect.
B)line balance.
C)capacity cushion.
D)timing bubble.
E)positioning hedge.

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Multiple Choice

Q 163Q 163

Short-term considerations in determining capacity requirements include:
A)demand trend.
B)cyclical demand variations.
C)seasonal demand variations.
D)mission statements.
E)new product development plans.

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Multiple Choice

Q 164Q 164

Which of the following is not a criterion for developing capacity alternatives?
A)design structured, rigid systems
B)take a big-picture approach to capacity changes
C)prepare to deal with capacity in "chunks"
D)attempt to smooth out capacity requirements
E)identify the optimal operating level

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Multiple Choice

Q 165Q 165

Seasonal variations are often easier to deal with in capacity planning than random variations because seasonal variations tend to be:
A)smaller.
B)larger.
C)predictable.
D)controllable.
E)less frequent.

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Multiple Choice

Q 166Q 166

Production units have an optimal rate of output where:
A)total costs are minimum.
B)average unit costs are minimum.
C)marginal costs are minimum.
D)rate of output is maximum.
E)total revenue is maximum.

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Multiple Choice

Q 167Q 167

When the output is less than the optimal rate of output, the average unit cost will be:
A)lower.
B)the same.
C)higher.
D)could be either higher or lower.
E)could be either higher, lower or the same.

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Multiple Choice

Q 168Q 168

When buying component parts, risk does not include:
A)loss of control.
B)vendor viability.
C)interest rate fluctuations.
D)need to disclose proprietary information.
E)product liability.

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Multiple Choice

Q 169Q 169

At the break-even point:
A)output equals capacity.
B)total cost equals total revenue.
C)total cost equals profit.
D)variable cost equals fixed cost.
E)variable cost equals total revenue.

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Multiple Choice

Q 170Q 170

What is the break-even quantity for the following situation?
FC = $1,200 per week
VC = $2 per unit
Rev = $6 per unit
A)100
B)200
C)600
D)1,200
E)300

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Multiple Choice

Q 171Q 171

An alternative will have fixed costs of $10,000 per month, variable costs of $50 per unit, and revenue of $70 per unit. The break-even point volume is:
A)100.
B)2,000.
C)500.
D)1,000.
E)800.

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Multiple Choice

Q 172Q 172

For fixed costs of $2,000, revenue per unit of $2, and variable cost per unit of $1.60, the break-even quantity is:
A)1,000.
B)1,250.
C)2,250.
D)5,000.
E)3,000.

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Multiple Choice

Q 173Q 173

Which of the following would not be a potential upside in a decision to outsource?
A)increased total production capacity
B)potential to lower fixed costs
C)supplier may have greater expertise to do the outsourced work
D)disclosure of proprietary information to supplier
E)supplier cost may be lower

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Multiple Choice

Q 174Q 174

If the output rate is increased but the average unit costs also increase, we are experiencing:
A)market share erosion.
B)economies of scale.
C)diseconomies of scale.
D)value-added accounting.
E)step-function scaleup.

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Multiple Choice

Q 175Q 175

The method of financial analysis which focuses on the length of time it takes to recover the initial cost of an investment is:
A)payback.
B)net present value.
C)internal rate of return.
D)queuing.
E)cost-volume.

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Multiple Choice

Q 176Q 176

When determining the timing and degree of capacity change, one can use the approach of:
A)lead time flexibility strategy.
B)expand-early strategy.
C)go-with-the-flow strategy.
D)backordering.
E)delayed differentiation.

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Multiple Choice

Q 177Q 177

The method of financial analysis which results in an equivalent interest rate is:
A)payback.
B)net present value.
C)internal rate of return.
D)queuing.
E)cost-volume.

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Multiple Choice

Q 178Q 178

The first, and perhaps most important, step in constraint management is to ____________ the most pressing constraint.
A)improve
B)support
C)identify
D)elevate
E)modify

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Multiple Choice

Q 179Q 179

A market constraint can be overcome by:
A)lobbying.
B)cash flow management.
C)outsourcing.
D)advertising or price changes.
E)supplier development.

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Multiple Choice

Q 180Q 180

Improving cash flow would be a reasonable thing to focus on when trying to overcome a _________ constraint.
A)financial
B)market
C)demand
D)supplier
E)material

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Multiple Choice

Q 181Q 181

The owner of Firewood To Go is considering buying a hydraulic wood splitter which sells for $50,000. He figures it will cost an additional $100 per cord to purchase and split wood with this machine, while he can sell each cord of split wood for $125. What would the potential profit be if he were to split 4,000 cords of wood with this machine?
A)$0
B)$200,000
C)$100,000
D)$75,000
E)$50,000

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Multiple Choice

Q 182Q 182

The owner of Firewood To Go is considering buying a hydraulic wood splitter which sells for $50,000. He figures it will cost an additional $100 per cord to purchase and split wood with this machine, while he can sell each cord of split wood for $125. How many cords of wood would he have to split with this machine to break even?
A)5,000
B)3,000
C)2,000
D)1,000
E)0

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Multiple Choice

Q 183Q 183

The owner of Firewood To Go is considering buying a hydraulic wood splitter which sells for $50,000. He figures it will cost an additional $100 per cord to purchase and split wood with this machine, while he can sell each cord of split wood for $125. How many cords of wood would he have to split with this machine to make a profit of $30,000?
A)3,200
B)1,500
C)2,000
D)1,000
E)500

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Multiple Choice

Q 184Q 184

The owner of Firewood To Go is considering buying a hydraulic wood splitter which sells for $50,000. He figures it will cost an additional $100 per cord to purchase and split wood with this machine, while he can sell each cord of split wood for $125. If, for this machine, design capacity is 50 cords per day, effective capacity is 40 cords per day, and actual output is anticipated to be 35 cords per day, what would be its utilization?
A)100 percent
B)80 percent
C)75 percent
D)70 percent
E)0 percent

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Multiple Choice

Q 185Q 185

The owner of Firewood To Go is considering buying a hydraulic wood splitter which sells for $50,000. He figures it will cost an additional $100 per cord to purchase and split wood with this machine, while he can sell each cord of split wood for $125. If, for this machine, design capacity is 50 cords per day, effective capacity is 40 cords per day, and actual output is expected to be 32 cords per day, what would be its efficiency?
A)100 percent
B)80 percent
C)75 percent
D)70 percent
E)0 percent

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Multiple Choice

Q 186Q 186

The owner of a greenhouse and nursery is considering whether to spend $6,000 to acquire the licensing rights to grow a new variety of rosebush, which she could then sell for $6 each. Per-unit variable cost would be $3. What would the profit be if she were to produce and sell 5,000 rosebushes?
A)$0
B)$9,000
C)$15,000
D)$10,000
E)$30,000

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Multiple Choice

Q 187Q 187

The owner of a greenhouse and nursery is considering whether to spend $6,000 to acquire the licensing rights to grow a new variety of rosebush, which she could then sell for $6 each. Per-unit variable cost would be $3. How many rosebushes would she have to produce and sell in order to break even?
A)1,600
B)2,400
C)2,000
D)1,000
E)1,500

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Multiple Choice

Q 188Q 188

The owner of a greenhouse and nursery is considering whether to spend $6,000 to acquire the licensing rights to grow a new variety of rosebush, which she could then sell for $6 each. Per-unit variable cost would be $3. How many rosebushes would she have to produce and sell in order to make a profit of $6,000?
A)1,600
B)2,400
C)3,000
D)1,000
E)4,000

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Multiple Choice

Q 189Q 189

The owner of a greenhouse and nursery is considering whether to spend $6,000 to acquire the licensing rights to grow a new variety of rosebush, which she could then sell for $6 each. Per-unit variable cost would be $3. If her available land has design and effective capacities of 3,000 and 2,000 rosebushes per year respectively, and she plans to grow 1,200 rosebushes each year on this land, what will be the utilization of this land?
A)0 percent
B)40 percent
C)60 percent
D)67 percent
E)100 percent

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Multiple Choice

Q 190Q 190

The owner of a greenhouse and nursery is considering whether to spend $6,000 to acquire the licensing rights to grow a new variety of rosebush, which she could then sell for $6 each. Per-unit variable cost would be $3. If her available land has design and effective capacities of 3,000 and 2,000 rosebushes per year, respectively, and she expects to be 80 percent efficient in her use of this land, how many rosebushes does Rose plan to grow each year on this land?
A)1,600
B)2,400
C)3,000
D)2,000
E)1,000

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Multiple Choice

Q 191Q 191

A Virginia county is considering whether to pay $50,000 per year to lease a prisoner transfer facility in a prime location near Washington, D.C. They estimate it will cost $50 per prisoner to process the paperwork at this new location. The county is paid a $75 commission for each new prisoner they process. What would be the county's annual profit if they were to process 4,000 prisoners per year at this new location?
A)$0
B)$75,000
C)$50,000
D)$100,000
E)$300,000

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Multiple Choice

Q 192Q 192

A Virginia county is considering whether to pay $50,000 per year to lease a prisoner transfer facility in a prime location near Washington, D.C. They estimate it will cost $50 per prisoner to process the paperwork at this new location. The county is paid a $75 commission for each new prisoner they process. How many prisoners would they have to process annually to break even at this new location?
A)5,000
B)8,000
C)2,000
D)4,000
E)6,000

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Multiple Choice

Q 193Q 193

A Virginia county is considering whether to pay $50,000 per year to lease a prisoner transfer facility in a prime location near Washington, D.C. They estimate it will cost $50 per prisoner to process the paperwork at this new location. The county is paid a $75 commission for each new prisoner they process. How many prisoners would they have to process annually to make a profit of $100,000 at this new location?
A)5,000
B)8,000
C)2,000
D)4,000
E)6,000

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Multiple Choice

Q 194Q 194

A Virginia county is considering whether to pay $50,000 per year to lease a prisoner transfer facility in a prime location near Washington, D.C. They estimate it will cost $50 per prisoner to process the paperwork at this new location. The county is paid a $75 commission for each new prisoner they process. If the holding area at this new location has design and effective capacities of 10,000 and 7,500 prisoners processed annually, respectively, and 5,000 prisoners will be processed per year, what will be the utilization of the holding area?
A)0 percent
B)30 percent
C)50 percent
D)60 percent
E)100 percent

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Multiple Choice

Q 195Q 195

A Virginia county is considering whether to pay $50,000 per year to lease a prisoner transfer facility in a prime location near Washington, D.C. They estimate it will cost $50 per prisoner to process the paperwork at this new location. The county is paid a $75 commission for each new prisoner they process. If their holding area at this new location has design and effective capacities of 10,000 and 7,500 prisoners processed annually, respectively, and they plan to be 80 percent efficient in their use of this space, how many prisoners does the county plan to process per year?
A)5,000
B)8,000
C)2,000
D)4,000
E)6,000

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Multiple Choice

Q 196Q 196

Doctor J. is considering purchasing a new blood analysis machine to test for HIV; it will cost $60,000. He estimates that he could charge $25.00 for an office visit to have a patient's blood analyzed, while the actual cost of a blood analysis would be $5.00. What would be his profit if he were to perform 5,000 HIV blood analyses?
A)$0
B)$40,000
C)$60,000
D)$25,000
E)$100,000

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Multiple Choice

Q 197Q 197

Doctor J. is considering purchasing a new blood analysis machine to test for HIV; it will cost $60,000. He estimates that he could charge $25.00 for an office visit to have a patient's blood analyzed, while the actual cost of a blood analysis would be $5.00. How many HIV blood analyses would he have to perform in order to break even?
A)12,000
B)2,400
C)3,000
D)1,000
E)5,000

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Multiple Choice

Q 198Q 198

Doctor J. is considering purchasing a new blood analysis machine to test for HIV; it will cost $60,000. He estimates that he could charge $25.00 for an office visit to have a patient's blood analyzed, while the actual cost of a blood analysis would be $5.00. How many HIV blood analyses would he have to perform in order to make a profit of $15,000?
A)3,000
B)4,800
C)5,000
D)12,000
E)3,750

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Multiple Choice

Q 199Q 199

Doctor J. is considering purchasing a new blood analysis machine to test for HIV; it will cost $60,000. He estimates that he could charge $25.00 for an office visit to have a patient's blood analyzed, while the actual cost of a blood analysis would be $5.00. If this new blood analysis machine has design and effective capacities of 6,000 and 5,000 blood analyses per year, respectively, and Dr. J. expects to perform 4,500 HIV blood analyses each year, what will be the utilization of this machine?
A)0 percent
B)75 percent
C)83 percent
D)90 percent
E)100 percent

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Multiple Choice

Q 200Q 200

Doctor J. is considering purchasing a new blood analysis machine to test for HIV; it will cost $60,000. He estimates that he could charge $25.00 for an office visit to have a patient's blood analyzed, while the actual cost of a blood analysis would be $5.00. If this new blood analysis machine has design and effective capacities of 6,000 and 5,000 blood analyses per year, respectively, and Dr. J. expects to be 80 percent efficient in his use of this machine, how many HIV blood analyses does he plan to perform each year?
A)3,200
B)4,800
C)4,000
D)1,000
E)5,000

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Multiple Choice

Q 201Q 201

Operation X feeds into operation Y. Operation X has an effective capacity of 55 units per hour. Operation Y has an effective capacity of 50 units per hour. Increasing X's effective capacity to ensure that Y's utilization is maximized would be an example of ________ a constraint.
A)overcoming
B)outsourcing
C)insourcing
D)cushioning
E)supporting

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Multiple Choice

Q 202Q 202

Operation X feeds into operation Y. Operation X has an effective capacity of 55 units per hour. Operation Y has an effective capacity of 50 units per hour. Finding a way to increase Y's effective capacity would be an example of ________ a constraint.
A)overcoming
B)cushioning
C)insourcing
D)cycling
E)repositioning

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Multiple Choice

Q 203Q 203

Which of the following makes using present value approaches in capacity decisions difficult?
A)The discount rate must be adjusted to account for inflation.
B)Some cash flows are positive and other cash flows are negative.
C)The payback period might not be long enough to justify a capacity decision.
D)Capacity decisions are made amidst much uncertainty, so cash flows cannot be estimated with great accuracy.
E)There is a cash outflow at the outset followed by, possibly, net cash inflows.

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Multiple Choice

Q 204Q 204

Suppose operation X feeds directly into operation Y. All of X's output goes to Y, and Y has no other operations feeding into it. X has a design capacity of 80 units per hour and an effective capacity of 72 units per hour. Y has a design capacity of 100 units per hour. What is Y's maximum possible utilization?
A)80 percent
B)72 percent
C)90 percent
D)70 percent
E)60 percent

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Multiple Choice

Q 205Q 205

Students at a major university must go through several registration steps. Officials have observed that it is typically the case that the waiting line at the fee-payment station is the longest. This would seem to suggest that the fee-payment station is the ___________ in the student registration process.
A)capacity cushion
B)first station
C)bottleneck
D)economy of scale
E)diseconomy of scale

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Multiple Choice

Q 206Q 206

Which of the following is not a factor that influences how frequently or infrequently capacity choices are made?
A)supply chain disruption
B)stability of demand
C)product design
D)technological change
E)competitive factors

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Multiple Choice

Q 207Q 207

The owner of Sky High Tours is considering purchasing a bus, which sells for $75,000, to expand their tour operations. The owner estimates that it will cost an additional $150 per tour to operate the bus, while the owner can book the bus for tours for $300. If, for this bus, design capacity is 60 passengers per tour, effective capacity is 50 passengers per tour, and actual output is anticipated to be 45 passengers per tour, what would be its utilization?
A)100 percent
B)90 percent
C)80 percent
D)75 percent
E)70 percent

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Multiple Choice

Q 208Q 208

Which of the following is not a determinant of effective capacity when looking at the facility factor?
A)facility size
B)product variety
C)distance to market
D)energy sources
E)transportation costs

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Multiple Choice

Q 209Q 209

Capacity cushion can be determined by:
A)capacity − strategic demand
B)capacity − predicted demand
C)capacity − expected demand
D)capacity − actual demand
E)capacity − estimated demand

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Multiple Choice

Q 210Q 210

A department within a firm works two 10-hour shifts, 345 days a year. The following are figures for the usage of a machine that is currently being considered. How many machines will the department need to purchase?
A)1
B)3
C)5
D)4
E)2

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Multiple Choice